THAILAND: VIEW: JP Morgan Expects Weak Inflation To Drive Rate Cut, Risks Remain

Thailand’s July CPI inflation was lower than expected due to vegetables and energy. Headline fell 0.7% y/y from -0.25% in June while core was +0.8% y/y down from 1.1% y/y. JP Morgan has revised down its inflation forecasts as a result and given “forward-looking conditions” with 2025 at -0.1% (previous +0.1%) and 2026 +0.5% (previous +0.9%). As a result, it is holding to its view that the Bank of Thailand will cut rates 25bp on August 13.

• JP Morgan sees risks “biased towards a hold if the Bank of Thailand (BoT) decides to preserve policy space ahead of the start of the new governor’s term in October. Either way, we continue to pencil in a terminal policy rate of 1.0% by 1Q26”.
• “Core-core CPI (excluding energy, raw food, and prepared food) continues to deflate on continuously weak demand-pull price pressures.”
• “The biggest deflationary catalyst last month came from raw food prices (-0.8%m/m, sa; -1.2%oya) against the backdrop of strong domestic agricultural output and weak food PPI.”
• “Despite global crude oil prices rebounding last month, energy CPI fell (-0.2%m/m, sa; -7.3%oya), helped by Oil Fund levy adjustments to maintain the diesel price cap.”
• “On a sequential basis, headline and core CPI were down 0.3%m/m, sa and flat, respectively, while the underlying trend remains weak (Figure 1). This marks the fourth consecutive month of annual deflation and the fifth straight month of below-target CPI prints.”