● Headline inflation sustained a growth of 1.2% YoY in April (Mar: 1.2%), matching consensus estimate, while remaining within the Bank of Thailand’s (BoT) target range of 1.0-4.0%. Likewise, on a MoM basis, the index grew by 0.4% (Mar: 0.4%). The core inflation sustained a tepid growth of 0.6% YoY for three consecutive months, suggesting continued weakness in demand-pull price pressure.

● The CPI growth was broadly stable as increase in transport & communication index (1.1%; Mar: 0.8%) was equally offset by decrease in the indices of food & non-alcoholic beverages (2.2%; Mar: 2.4%) and housing & furnishing (0.5%; Mar: 0.6%). Transport index edged to a 5-month high, underpinned by an increase in domestic fuel prices (Gasohol 95: THB29.55/litre; Mar: THB28.47/litre). The uptrend is expected to continue in the next few months, driven by firmer global oil prices, especially following the announcement of the US’s decision to terminate sanction waivers for major importers of Iranian oil effective 2nd May. Meanwhile, the food index eased slightly, but remained among the highest in the past 34 months, influenced by the ongoing El Nino season. Housing & furnishing softened marginally, attributable to lower house rent index (0.3%; Mar: 0.4%).

● Headline inflation picked up across most advanced and developing economies on high energy prices in March, but underlying price pressure remained tame. US inflation accelerated to 1.9%, propelled by rising energy and food prices, masking a slowdown in its core index, which charted the smallest gain in 13 months (2.0%), and hence justifying Fed’s decision to put rate hikes on hold. Similarly, core inflation slowed further to 1.0% in the Eurozone, remaining well below European Central Banks’s (ECB) 2.0% inflation target. Within Asia, China experienced a 5-month high inflation, mainly due to heightened pork prices as farmers increased slaughtering of pigs to stem the spread of swine virus.

● Our assesment of Thailand’s inflation remains unchanged, with the inflationary pressure expected to be benign, growing between 0.5-1.0% in 2019 (2018: 1.1%), against the backdrop of cooling global growth and the ongoing US-China trade dispute, which may seep through as a hindrance to domestic activities. As the inflation is envisaged to register below BoT’s target range of 1.0-4.0% for most of the remaining months of 2019, coupled with Thai Baht’s strength, we believe BoT would maintain its policy rate at 1.75% throughout the year.

Source: Kenanga Research - 2 May 2019