Thailand's headline inflation slowed more than expected in June as easing Middle East tensions cooled energy markets, although strong demand at home pushed core inflation to a six-year high.
The headline Consumer Price Index (CPI) rose 2.42% year over year, softer than May's 2.79% increase, according to Ministry of Commerce data released Monday.
The reading came in below analysts' expectations for a 4% increase, according to Trading Economics data.
Core inflation, which strips out volatile energy and fresh food prices, rose 1.23% in June from a year earlier, faster than the 0.92% increase in May and against analysts' 1.0% consensus forecast. It marked the highest print since June 2023.
While local fuel costs remain high, global crude prices experienced a sharp selloff following a U.S.-Iran memorandum of understanding that triggered a fragile ceasefire.
"The sell-off has been driven firstly by the premature expectation of a normalization in oil supply from the Persian Gulf, and secondly, clear weakness in the physical market," ING's head of commodities strategy, Warren Patterson, said in a June 29 note.
"However, we believe that the market is being too optimistic over the speed of the supply recovery as well as its sustainability."
Elsewhere, non-food and beverage prices rose 3.31% year over year, reflecting high fuel prices, while food and non-alcoholic beverage prices inched up 1.03%, boosted by rising costs of prepared food, rice and non-alcoholic drinks, among others.
For the second quarter, the average CPI climbed 2.70% year over year and up 3.08% on a quarter-over-quarter basis. Average CPI in the first half edged up 1.08% from a year earlier.
The ministry expects third-quarter inflation to remain positive, driven by the anticipated increase in domestic retail fuel prices as the Middle East crisis continues, among other factors.
Headline inflation for the full year is expected to range between 1.5% and 2.5%. The Bank of Thailand expects headline inflation for 2026 to average 2.8% and for 2027 at 1.4%.
The BOT kept its policy rate unchanged at 1% during its most recent policy meeting as inflation remains within the central bank's target range.
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