Thai inflation negative for six straight months as full year forecast lowers

Thailand's headline inflation dropped 0.72% year-on-year in September, marking the sixth consecutive month of negative readings and staying well below the central bank's 1.0%-3.0% target; the commerce ministry now forecasts 0% inflation for the full year. This persistent disinflation, despite positive core CPI indicating no deflation, underscores a sluggish economy and strengthens expectations for further monetary easing by the central bank, which cut rates in August and is anticipated to do so again, even as the government introduces stimulus measures.

Analysis

Asia stocks: Nikkei soars to record high as Takaichi win fuels stimulus bets BANGKOK (Reuters) -Thailand’s annual headline inflation rate was negative for a sixth straight month in September, driven by lower energy prices, the commerce ministry said on Monday as it lowered its full year forecast to 0%. It was also the seventh consecutive month that the inflation rate was below the central bank’s target range of 1.0% to 3.0%. The headline consumer price index dropped 0.72% in September from a year earlier, deeper than the 0.60% decline forecast in a Reuters poll, and followed a 0.79% drop in August. The core CPI, which excludes volatile energy and fresh food prices, rose 0.65% in September from a year earlier, compared with a forecast increase of 0.76%. There are no signs of deflation because the core CPI was positive, the ministry said. In the first nine months of 2025, annual headline inflation had an average decline of 0.01%, with core inflation at 0.90%, the ministry said. In August, the central bank cut its key interest rate by 25 basis points to a near three-year low of 1.50%. It will review policy on Wednesday and most economists expect a further rate reduction. Thailand’s new government is in the middle of a programme aimed at boosting a sluggish economy hit by tariffs, political uncertainties and a soaring currency. The commerce ministry said one of the stimulus measures - a co-payment scheme that will subsidise up to 60% of the costs of certain food and consumer goods - was unlikely to bring more inflationary pressures into the economy. "The government’s co-payment policy will not help increase inflation much because it is short term, but it will help with consumer confidence," said Nantapong Chiralerspong, head of the commerce ministry’s Trade Policy and Strategy Office. Which stock should you buy in your very next trade? AI computing powers are changing the stock market. Investing.com's ProPicks AI includes dozens of winning stock portfolios chosen by our advanced AI. Year to date, 3 out of 4 global portfolios are beating their benchmark indexes, with 98% in the green. Our flagship Tech Titans strategy doubled the S&P 500 within 18 months, including notable winners like Super Micro Computer (+185%) and AppLovin (+157%). Which stock will be the next to soar? Thailand's economy is signaling persistent weakness, with the headline consumer price index contracting for a sixth consecutive month, falling 0.72% year-over-year in September. This figure not only missed the Reuters poll forecast of a 0.60% decline but also marks the seventh straight month that inflation has remained below the Bank of Thailand's 1.0% to 3.0% target range. While the commerce ministry highlights the positive 0.65% core CPI reading to dismiss deflationary risks, this core metric also fell short of expectations and is insufficient to counter the broader disinflationary trend, which has prompted the ministry to revise its full-year inflation forecast down to zero. The data solidifies expectations for further monetary easing, as a sluggish economy grappling with tariffs and a strong currency has already seen the central bank cut its key rate to 1.50% in August. With most economists anticipating another rate reduction at the upcoming policy meeting, the government's new fiscal stimulus, such as a co-payment scheme, is seen by officials as a short-term confidence booster with minimal inflationary impact, underscoring the depth of the economic challenge.

Key Decisions for Investors

• Given the high probability of another interest rate cut by the Bank of Thailand, investors should anticipate further downward pressure on Thai bond yields and consider positioning accordingly.
• The combination of persistent disinflation and expected monetary easing points to potential weakness for the Thai Baht (THB), warranting a review of currency hedges for THB-denominated assets.
• While government stimulus may provide a temporary lift to consumer-focused equities, the official forecast of a limited inflationary impact suggests that underlying economic sluggishness remains a significant headwind for corporate earnings growth.