By Orathai Sriring and Kitiphong Thaichareon
BANGKOK Thailand's May headline inflation rate dropped to its lowest in 21 months due to lower energy and food prices and a high base in 2022, the commerce ministry said on Tuesday, with consumer prices expected to fall further.
The headline consumer price index (CPI) rose 0.53% in May from a year earlier, sharply below a rise of 1.70% forecast in a Reuters poll, and against April's 2.67% year-on-year increase.
The core CPI index in May rose 1.55% from a year ago, below a forecast increase of 1.6%, and against April's 1.66% rise.
It was the third straight month when headline inflation came within the central bank's target range of 1%-3%.
Annual headline inflation is expected to decline further and possibly shrink in June as energy prices were trending downwards from the previous year, ministry official Wichanun Niwatjinda told a press conference.
"In the coming months, inflation could be lower than 0.5% and we may see 0% in some periods," he said.
Headline inflation is expected to be more than 1% in the second quarter year-on-year and lower in the remaining quarters.
The commerce ministry forecast average headline inflation at 1.7%-2.7% this year and will review that projection next month, Wichanun said.
In the January-May period, annual headline inflation was 2.96%, with the core rate at 1.98%, the ministry said.
Last week, Thailand's central bank raised its policy interest rate by a quarter point to 2%. It will next review the rate on Aug. 2.
However, May's lower-than-expected inflation data makes a further rate hike less likely, said Kobsidthi Silpachai, head of capital markets research at Kasikornbank.
"This makes it quite hard for the monetary policy committee to continue marching with another hike any time soon especially now that inflation is below the BOT's inflation target band of 1% to 3%," he said.
(Editing by Kanupriya Kapoor)
