Commerce Ministry sees 2017 inflation at 1.5-2 per cent

The ministry reported yesterday that the Consumer Price Index in December had increased 1.13 per cent year on year – the highest level in 25 months – while rising 0.13 per cent compared with the previous month.
The year-on-year increase was due mainly to the price of crude oil being 12.21 per cent higher than in December 2015, as well as price rises for some foods. 
The official inflation target was in a range of minus-1 per cent to minus-0.2 per cent. “Inflation could increase continuously this year as stronger economic growth is expected, while oil prices will climb and the baht will continue its depreciation,” said Pimchanok Vonkorpon, director of the ministry’s Trade Policy and Strategy Office.
With an expected economic recovery, inflation will remain in positive territory, reflecting higher consumer purchasing power, more trade and price increases for some consumer goods, she added.
The ministry’s inflation outlook for 2017 assumes Dubai oil being in a range of US$45-$55 per barrel and Thai economic growth of 3-3.5 per cent, while the baht is expected to depreciate to an average of 35.5-37.5 against the US dollar. 
Last month, the food and beverage price index was up 1.36 per cent year on year, while the non-food index headed up 1 per cent. 
Core inflation, which excludes volatile fuel and food prices, was 0.74 per cent for the whole year, within the central bank’s target range of 0.5-3 per cent. 
Core inflation in December rose 0.74 per cent year on year, and 0.01 per cent month on month.
In a related matter, the Bank of Thailand has maintained its average headline inflation target of 2.5 per cent, plus or minus 1.5 percentage points, as the medium-term monetary-policy target for the year, with the current tolerance band being deemed sufficient to cushion any volatility that may cause inflation to deviate from the mid-point of the target in the short term.
The BOT’s Monetary Policy Committee (MPC) and the Finance Ministry had agreed to keep the annual average headline inflation target at this level, the central bank said yesterday. 
The target is considered supportive for economic growth and financial stability, while also helping maintain the country’s competitiveness, the bank said.
In addition, the target reflects medium-term inflation expectations, which remain well-anchored around the mid-point of the target, it added. 
Nevertheless, global structural changes will affect inflation and monetary policy, and the MPC will closely monitor such changes and other factors to ensure that both monetary policy and the inflation target are conductive to achieving price stability as well as economic growth, while effectively ensuring financial stability, the bank said.
It reported that the agreement between the MPC and the Finance Ministry stated: “In the event that headline inflation breaches the target of 2.5 per cent with a tolerance band of +/-1.5 percentage points, the MPC shall explain why inflation has moved from the target, the policy action that the MPC is taking to deal with it, as well as the period within which the MPC expects inflation to return to target. 
“The MPC is also required to inform the Finance Ministry of progress on the policy action in a timely manner.”