May inflation drops to 42-month low of 2.27%
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Inflation in May slowed to its weakest pace in 42 months to 2.27 per cent year on year, providing room for further policy-rate cuts even though borrowing costs were trimmed recently.
“Inflation eased from declining oil prices in the world and lower domestic oil prices as a result of the baht’s appreciation,” Watcharee Wimuktayon, permanent secretary of the Commerce Ministry, said yesterday.
This was the smallest year-on-year reading since November 2009. Consumer prices edged up 0.24 per cent, a five-month record low, from April, according to the ministry. Inflation averaged 2.8 per cent in the first five months of the year.
Fresh food remained expensive on greater demand after the start of the school semester and restrained supply due to the uncooperative climate, she said.
Despite the high fresh-food prices, inflationary pressure is mild as the government continues to control the prices of products and fuel, Watcharee said.
As consumer prices remain low and economic indicators, including manufacturing and consumption, have signalled some slowdown, the government and some private organisations have demanded the Bank of Thailand’s Monetary Policy Committee (MPC) to cut the benchmark rate further month to month to slow the pace of the baht and fuel the economy.
The authority snipped the policy rate by 25 basis points to 2.50 per cent last Wednesday, but that added only 0.0025 percentage point to inflation.
A 1-percentage-point shave would push up inflation by 0.01 percentage point. Policy-rate moves are not a major factor for inflation, Watcharee said.
The softening of inflation did not signify that people were not spending, as May’s inflation was 0.24 per cent month on month.
The ministry believes inflation bottomed out in May and would rise with stability. The 2013 inflation target remains at 2.8-3.4 per cent.
Prices of fresh food are projected to decline this month as vegetables, fruits and eggs become more plentiful in the rainy season.
In May, amid a 3.59-per-cent rise in the prices of food and non-alcoholic drinks, those of vegetables and fruits increased 12.80 per cent from the year before, while prices of rice and flour products edged up by 1.04 per cent and of processed foods by 1.14 per cent. Non-food and beverage prices gained 1.60 per cent.
Core inflation last month, excluding fresh food and fuel, ran 0.94 per cent year on year and 0.05 per cent month on month. The five-month average was 1.3 per cent, which remains within the central bank’s target band of 0.5-3.00 per cent.
