Why it's impossible for Thailand inflation to remain very low

As domestic economy is poised for growth.

According to DBS, for Thailand, inflation has been surprisingly mild despite the ongoing progrowth policies. The minimum wage hike in January does not seem to have any impact on prices at all as the government maintains administered controls on selected consumer goods and energy prices.

From a consumer price inflation perspective, the central bank (BoT) can maintain an accommodative monetary policy and even has some room to lower the policy rate to reduce speculative inflows.

Here's more from DBS:

However, it is far from clear that inflation can continue to stay so low when the domestic economy is poised to grow above trend this year and the next.

Moreover, there has been a disconnect between consumer prices and asset prices. With significant run ups in the stock market and property market over the past year, keeping interest rates low for an extended period risks a further buildup in asset prices.

From this viewpoint, room to cut rates becomes more constrained.

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