BANGKOK (Reuters) - Thai headline inflation fell to a five-year low in November as oil prices weakened, but analysts say interest rates are not likely to be cut soon with the country under martial law.
With inflation easing amid more pressure on global growth, central banks in Japan and China have loosened policy. Thailand’s economy is also confronting a slowdown with domestic consumption struggling amid high household debts.
Thailand’s annual headline inflation in November dropped to 1.26 percent, slightly less than the forecast 1.30 percent in a Reuters poll, government data showed on Monday.
The core inflation rate, which strips out fresh food and energy prices, eased to 1.60 percent in November from 1.67 percent in October.
Despite easing inflation, economists believe the central bank will not cut rates soon as such a move could raise doubts about the junta’s leadership.
“A rate cut might be seen as a vote of no confidence to the current administration’s handling of the economy,” said Kobsidthi Silpachai, head of capital markets research at Kasikornbank in Bangkok. He added that any monetary policy under martial law was unlikely to change much.
Others said the government would likely delay a change in policy as one now would have limited effect.
Bernard Aw, economist with Forecast in Singapore, said: “policy ammunition should be conserved for the moment while the monetary authority awaits core data on economic developments.”
The Bank of Thailand has left its policy rate THCBIR=ECI steady at 2 percent since March, when it was cut by 25 basis points to help businesses hurt by months of political unrest. It next reviews policy on Dec. 17.
A military coup in May has restored some confidence, but key sectors of the economy such as tourism are barely picking up. Southeast Asia’s second-largest economy grew 0.2 percent in the first nine months of 2014.
Inflation in Thailand has been benign, with prices curbed by government controls and subsidies and also weak domestic demand.
The Commerce Ministry forecast annual headline inflation of 2.0 percent for this year and 1.8-2.5 percent for next year.
The central bank aims to keep core inflation in a range of 0.5-3.0 percent, and sets policy to achieve that. But it wants to switch to targeting headline inflation.
Editing by Jacqueline Wong