Headline consumer price index (CPI) fell a smaller than expected 0.98% in July from a year earlier as food prices increased and domestic activity resumed after the easing of coronavirus curbs, the Commerce Ministry said on Thursday.
The reading — the smallest decline in four months — compared with a forecast for a fall of 1.46% in a Reuters poll, and June's 1.57% decline.
The core CPI index rose 0.39% in July from a year earlier, compared with a forecast of 0.0%, and June's 0.05% dip.
All indexes pointed to an economic recovery, said Pimchanok Vonkorpon, director-general of the Trade Policy and Strategy Office.
"It can't be called an uptrend yet, but it's a good sign," Ms Pimchanok told a briefing.
In January-July, the headline CPI declined 1.11% from a year earlier while the core CPI rose 0.34%.
Thailand has removed most restrictions imposed to curb its coronavirus outbreak, in the absence of community transmission for more than two months. But foreign tourists are still not allowed to return.
"That said, price pressures are set to remain muted amid a slow economic recovery, and while monetary policy will remain accommodative, there appears to be little appetite for further rate reductions," ANZ said in a note.
On Wednesday, the Monetary Policy Committee held its key interest rate steady at a record of 0.50%, saying the economy would gradually recover and headline inflation should return to its 1%-3% target next year.
In June, the Bank of Thailand predicted Southeast Asia's second-largest economy would shrink by a record 8.1%. It will review that at its next policy review on Sept 23.