Thai inflation past peak but living costs may stay high

Thailand’s inflation rate is showing signs of moving past its sharpest point, as production costs and global oil pressure begin to ease, but households may still face a more lasting rise in daily living expenses.

The Trade Policy and Strategy Office, or TPSO, said the headline consumer price index for June 2026 stood at 102.85, up 2.42% from the same month last year. The rate marked a third consecutive month of annual increase, although the pace began to slow. Headline inflation for the first six months of 2026 averaged 1.08%.

Natiya Suchinda, deputy director-general of the TPSO under the Commerce Ministry, said recent inflation had been driven largely by refined oil prices, which remained higher than in 2025 because of the impact of conflict in the Middle East. Higher fuel costs had pushed up public transport fares and lifted prices of ready-made food across a wide range of items, adding clearly to household costs.

In June, prices in non-food and non-alcoholic beverage categories rose 3.31%, led by fuel, public transport fares, rents and cleaning-related products and services.

Several key items, however, fell in price, including electricity, hotel room rates, personal care items and clothing.

Food and non-alcoholic beverages rose 1.03%, with increases seen in ready-made meals, white rice, non-alcoholic drinks and fresh fruit. Prices of several items declined, including pork, glutinous rice and fresh vegetables.

Core inflation, which excludes fresh food and energy, rose 1.23% in June, accelerating from May. For the first half of 2026, core inflation increased 0.79%.

The rise in core inflation came even as broader inflation pressure started to ease after the Middle East situation improved and the Strait of Hormuz reopened, reducing pressure from oil prices. However, continued increases in ready-made food prices kept core inflation on an upward path.

Natiya said whether inflation in 2026 had already passed its peak would still depend heavily on oil prices, which remain highly volatile. Earlier expectations had pointed to a sharp rise in crude prices, but prices fell again within days.

She said oil price movements would need to be closely monitored because they have a strong effect on Thailand’s inflation. Inflation for the remaining months of the year was unlikely to turn negative and was expected to remain broadly stable.

Higher living costs may become permanent

Headline inflation in the third quarter of 2026 is expected to remain positive at 2.79%. Supporting factors include domestic fuel retail prices that remain higher than in 2025 due to the Middle East conflict, as well as the restructuring of domestic fuel retail prices.

Ready-made food prices have also risen gradually across a wide range of dishes, with relatively large increases per plate, even though some production costs have started to show signs of easing. The trend points to a cost-of-living burden that may become more permanent.

A survey of 1,535 items across seven single-dish meal categories found that 438 items, or 28.53%, had increased in price. The menus surveyed were fried rice, pad see ew and gravy noodles, red pork rice, chicken rice, som tam, noodles and rice with stir-fried holy basil.

Of the items that increased, 182 rose by 5 baht and 244 rose by 10 baht. The lowest increase was 8.33%, such as a dish rising from 60 baht to 65 baht, while the highest was 33.33%, such as som tam rising from 30 baht to 40 baht.

Travel expenses have also increased, particularly bus fares, in line with fuel prices that remain above last year’s levels. Prices of key fresh vegetables are also likely to be higher than in 2025 because of last year’s low base. Officials are also monitoring El Niño risks, particularly the level of rainfall.

Full-year inflation target maintained at 2%

Factors expected to limit headline inflation include electricity tariffs from May to August 2026, which remain slightly lower than in the same period of 2025, and meat prices, which are likely to ease because of sufficient supply in the market.

Global oil prices also need to be watched after the reopening of the Strait of Hormuz, although officials remain uncertain whether the improvement will continue. The Thais Help Thais Plus scheme is not expected to affect inflation directly, but it is expected to support household purchasing power.

The Commerce Ministry continues to forecast headline inflation for 2026 at 1.5-2.5%, with a midpoint of 2.0%. Its assumptions include GDP growth of 1.5-2.5%, Dubai crude oil at 80-90 dollars per barrel and an exchange rate of 32-33 baht per US dollar. The ministry said it would revise its inflation forecast if oil prices fall further.

Economist sees inflation past its peak

Thanawat Polvichai, rector of the University of the Thai Chamber of Commerce, said there were clear signs that inflation had already passed its peak, as production cost pressures that had been the main force pushing prices higher continued to ease.

He said lower global oil prices had reduced costs for businesses, production and transport.

Between March and May 2026, Thailand’s inflation was hit by cost-push pressure after global crude oil prices climbed to 110 dollars per barrel, driving up energy, transport and production costs. The government’s cost-of-living measures and the use of the Oil Fuel Fund helped soften the impact.

As crude oil prices later fell below 100 dollars per barrel, and talks to reduce tensions in the Middle East began to show progress, oil prices declined to around 90 dollars per barrel before falling to about 70 dollars per barrel. This significantly reduced cost pressure.

Concerns over oil shipments through the Strait of Hormuz have also eased, lowering the risk of shortages in oil, petrochemical raw materials and plastic pellets. Fertiliser, packaging and domestic and international transport costs have not risen further, reducing the type of inflation pressure seen earlier.

MPC expected to hold rate at 1% until year-end

Thanawat said if a temporary ceasefire develops into a lasting end to the conflict and no new events disrupt global energy prices, Thai inflation is unlikely to rise sharply again. This would reduce the chance of inflation accelerating to 5% in 2026.

Another important factor is that Thailand’s economy has not fully recovered, leaving demand too weak to push up goods and services prices from the purchasing side.

These conditions should allow the Bank of Thailand to maintain an accommodative monetary policy, as inflation pressure remains within the target range. The policy interest rate is therefore expected to stay at 1% to support the economic recovery through the rest of the year.