Thai Inflation at Fresh 14-Year High Boosts Rate Hike Odds

(Bloomberg) -- Sign up for the New Economy Daily newsletter, follow us @economics and subscribe to our podcast.

Most Read from Bloomberg

• Natural Gas Soars 700%, Becoming Driving Force in the New Cold War

• Citi Says Oil May Collapse to $65 by the Year-End on Recession

• Oil Plummets Below $100 as Recession Risks Come to Forefront

• US Wants Dutch Supplier to Stop Selling Chipmaking Gear to China

• Ukraine Latest: Kyiv’s Immediate Funding Needs Hit $65 Billion

Thailand’s retail inflation accelerated in June to a new 14-year high, boosting the case for central bank to raise borrowing costs sooner than later.

Consumer prices rose 7.66% from a year earlier, accelerating from 7.1% a month ago, official data showed Tuesday. That’s faster than the median 7.45% gain predicted by economists in a Bloomberg survey and the highest since July 2008.

The surge in prices comes despite government extending subsidies to check prices of retail fuel, and businesses largely withholding from passing on costs to consumers, according to Ronnarong Phoolpipat, director general of Trade Policy and Strategy Office. That implies an impending rise in living costs when the pass-through happens or should subsidies be withdrawn.

Faster inflation adds to the case for Southeast Asia’s second-largest economy to join central banks the world over in tightening policy settings to rein in price gains. The Bank of Thailand has for now ruled out the need for any unscheduled rate action, with one more price print due next month before policy makers meet to review monetary policy on Aug. 10.

“We do not think this raises a risk of an inter-meeting as some may have speculated,” said Nomura Holdings Inc. analyst Charnon Boonnuch. “Nonetheless, we believe that a 25 basis-point hike in August is likely a done deal.”

What Bloomberg Economics Says...

“The pickup in Thailand’s consumer price gains in June will probably stoke inflation expectations, even though it was partly due to a less favorable basis of comparison. This should increase pressure on the Bank of Thailand to tighten ‘monetary policy’.”

-- Tamara Henderson, Asean economist

For the full note, click here

The Thai interest rate-setting committee said late last month delaying monetary policy normalization amid heightened inflation pressures may cause “greater costs” to the nation’s economy after keeping the key rate unchanged in a 4-3 split vote.

Some other key details from Tuesday’s price print:

• Consumer prices rose 0.9% month-on-month, beating estimate was for a 0.78% gain

• Core consumer prices rose 2.51% from year ago; estimate was for 2.37% increase

• Index of foods and non-alcohol beverage rose 6.42%

• Energy prices jumped 39.97%; Transport and communication costs surged 14.75% on rising fuel prices and public transport fares

• CPI in the first half was 5.61% while core inflation stood at 1.85%

(Updates with official comments in the third paragraph.)

Most Read from Bloomberg Businessweek

• The Lottery Lawyer Won Their Trust, Then Lost Their Mega Millions

• Google Is Going to Let Politicians Spam Your Inbox

• Geely Is Launching Satellites in a Bid to Bring Driverless Cars to China

• Gangs Are Fake-Killing People in India for Insurance Payouts

• Did Razzlekhan and Dutch Pull Off History’s Biggest Crypto Heist?

©2022 Bloomberg L.P.