Thailand’s inflation rate declined for the fifth consecutive month in August, mainly due to weaker energy and fresh food prices. The Ministry of Commerce anticipates further declines throughout this year.
The official consumer price index (CPI) fell 0.79% in August compared to the same month last year, exceeding the forecast of a 0.70% decline from a Reuters poll and also surpassing the 0.70% decrease registered in July.
This marks the sixth month in a row that inflation has been below the Bank of Thailand’s target range of 1-3%.
Natiya Suchinda, Deputy Head of the Ministry’s Trade Policy and Strategy Office, stated during a press conference that the CPI could see a 0.66% decline year-on-year in the third quarter and a 0.24% decrease in the last quarter of 2025. She also suggested that full-year inflation might turn negative, considering the average of just 0.08% in the first eight months of 2025. The ministry is reviewing its initial forecast of 0-1% inflation for 2025.
She clarified, however, that this does not constitute deflation, explaining that the decline has been primarily driven by supply factors rather than demand.
Despite the negative headline CPI readings, core inflation—which excludes volatile energy and fresh food prices—rose 0.8% in August compared to the previous year. Year-to-date, core inflation averaged 0.94%.
In response, the Bank of Thailand cut its key interest rate by 25 basis points to 1.50% in September, a near three-year low, to support the slowing economy. The next rate review is scheduled for October 8, with some analysts expecting additional rate reductions.
During a Thursday briefing, outgoing Governor Sethaput Suthiwartnarueput suggested that the focus on specific inflation targets should be reconsidered, as supply shocks increasingly influence price trends beyond the scope of monetary policy.
Since the introduction of a formal inflation band in 2020, Thailand has frequently missed its official target. Sethaput argued that maintaining a strict focus on a particular number or range has been counterproductive, as it pressures policymakers to cut borrowing costs, potentially at the expense of economic growth and financial stability.
He emphasized that the recent series of negative inflation figures does not signify deflation, noting rising wages and positive core prices. Despite pressure from government officials to lower rates, Sethaput highlighted the need for a more flexible inflation strategy.
“If anything, we should move away from specific numerical targets or even ranges, toward a more adaptable inflation-targeting approach,” he said, noting that this will be the focus of his successor, Vitai Ratanakorn, who takes over as Governor on October 1.
He added that the primary goal remains to keep inflation low and stable but acknowledged that the precise level might become less critical.
Sethaput also pointed out that domestic inflation figures are skewed by subsidies on fuel and electricity and reassured that inflation remains well-anchored without signs of a negative wage spiral, despite a 4-5% rise in wages earlier this year.
Finally, he stressed the importance of maintaining flexibility in inflation policy, emphasizing that high or unstable inflation, as well as deflation, are all undesirable outcomes—highlighting the necessity of a balanced and adaptable approach moving forward.