Thailand’s headline inflation rate YoY for December 2025 was reported at -0.49%, a notable improvement from November’s -0.76% but still reflecting mild deflation. This figure slightly outperformed market expectations of -0.60%, signaling a modest easing of price declines. Over the past 12 months, inflation has oscillated between positive and negative territory, with a 12-month average near -0.10% according to the Sigmanomics database.

Drivers this month

• Energy prices contributed -0.15 percentage points (pp) to inflation, reflecting global oil price stabilization.
• Food and beverage prices remained flat, contributing 0.00 pp, supported by stable agricultural output.
• Core goods and services inflation edged up by 0.05 pp, indicating slight domestic demand recovery.

Policy pulse

The Bank of Thailand’s inflation target range of 1-3% remains unmet, with the current print well below the lower bound. The central bank continues to maintain an accommodative stance, keeping the policy rate at 1.00% to support growth and avoid deflationary spirals.

Market lens

Immediate reaction: The THB/USD currency pair showed a mild appreciation of 0.10% post-release, while 2-year government bond yields remained stable near 1.20%. Breakeven inflation rates for Thailand edged up slightly, reflecting tempered optimism about inflation normalization.

Thailand’s inflation dynamics must be viewed alongside key macroeconomic indicators. GDP growth for Q3 2025 was 2.30% YoY, down from 3.10% in Q2, signaling a slowdown in economic momentum. Unemployment remains low at 1.20%, but wage growth is subdued at 1.50% YoY, limiting upward pressure on prices.

Monetary Policy & Financial Conditions

The Bank of Thailand’s policy rate has held steady at 1.00% since mid-2025. Financial conditions remain loose, with credit growth at 4.50% YoY and stable liquidity in the banking system. Inflation expectations remain anchored but below target, complicating the central bank’s policy calculus.

Fiscal Policy & Government Budget

The government’s fiscal stance remains expansionary, with a budget deficit projected at 3.80% of GDP for 2025. Stimulus measures targeting infrastructure and social welfare aim to boost domestic demand. However, rising public debt levels (currently 48% of GDP) constrain long-term fiscal flexibility.

External Shocks & Geopolitical Risks

Global supply chain disruptions have eased but remain a risk factor. Thailand’s export sector faces headwinds from slowing demand in China and Europe. Geopolitical tensions in Southeast Asia add uncertainty to trade flows and investment sentiment.

Drivers this month

• Energy price stabilization reduced downward pressure by 0.11 pp compared to November.
• Food prices remained steady, contributing to inflation stability.
• Core inflation components showed slight upward momentum (0.05 pp), reflecting tentative demand recovery.

Policy pulse

The inflation print remains below the 1% lower bound of the Bank of Thailand’s target range, reinforcing the case for continued accommodative monetary policy. The central bank is likely to maintain current rates while monitoring inflation trajectory closely.

Market lens

Immediate reaction: Thai government bond yields held steady, while the THB currency appreciated marginally. Inflation-linked securities saw a slight uptick in demand, reflecting improved inflation expectations.

Looking ahead, Thailand’s inflation outlook is shaped by several key factors. The baseline scenario projects inflation gradually rising to near 0.50% by mid-2026 as global commodity prices stabilize and domestic demand recovers. The Bank of Thailand is expected to maintain accommodative policy through this period.

Bullish scenario (20% probability)

• Stronger-than-expected export growth and tourism rebound drive inflation above 1.50% by Q3 2026.
• Wage growth accelerates, boosting domestic consumption and price pressures.
• Global energy prices rise moderately, lifting headline inflation.

Base scenario (60% probability)

• Inflation remains subdued but positive, averaging 0.30-0.50% through 2026.
• Monetary policy stays accommodative, supporting gradual demand recovery.
• External risks remain contained, with stable commodity prices.

Bearish scenario (20% probability)

• Prolonged global slowdown and supply chain disruptions keep inflation below zero.
• Fiscal constraints limit stimulus effectiveness, dampening demand.
• Deflation risks persist, pressuring corporate margins and investment.

Risks to the outlook include geopolitical tensions in the region, volatile energy markets, and potential shifts in global monetary policy tightening. The Bank of Thailand’s ability to balance growth and inflation objectives will be critical.

Thailand’s December 2025 inflation rate YoY of -0.49% reflects ongoing deflationary pressures but with signs of moderation. The data underscores the challenges facing policymakers in steering inflation back within the 1-3% target range amid subdued demand and external uncertainties. Continued accommodative monetary policy and targeted fiscal support are likely necessary to foster a sustainable inflation rebound.

Structural factors such as demographic shifts, productivity trends, and global integration will shape Thailand’s inflation trajectory over the medium term. Market participants should monitor inflation prints closely alongside core macro indicators to gauge the evolving policy stance and economic momentum.

Key Markets Likely to React to Inflation Rate YoY

Thailand’s inflation data typically influences several key markets, including domestic equities, currency pairs, government bonds, and regional trade-linked assets. Investors track these markets closely for signals on monetary policy shifts and economic health.

• SET: Thailand’s main stock index is sensitive to inflation trends affecting corporate earnings and consumer spending.
• THBUSD: The Thai baht versus US dollar currency pair reacts to inflation data as it impacts interest rate differentials and capital flows.
• BAY: Bank of Ayudhya’s stock price correlates with inflation and interest rate expectations influencing lending margins.
• BTCUSD: Bitcoin’s price often moves inversely with inflation expectations, serving as an alternative store of value.
• USDCNH: The US dollar versus Chinese yuan pair impacts Thailand’s export competitiveness and inflation via trade channels.

Insight: Inflation Rate vs. SET Index Since 2020

Since 2020, Thailand’s inflation rate YoY and the SET index have shown a moderate positive correlation (r≈0.45). Periods of rising inflation generally coincide with stronger equity performance, driven by improved corporate pricing power and economic growth. For example, the inflation spike in early 2022 aligned with a 15% rally in the SET. Conversely, deflationary periods like late 2025 saw equity volatility and muted gains. This relationship underscores inflation’s role as a key macro driver for Thai equities.

FAQs

What does Thailand’s latest inflation rate YoY indicate?

The latest inflation rate of -0.49% indicates mild deflation but a moderation from previous months, reflecting weak demand and stable energy prices.

How does the inflation rate affect Thailand’s monetary policy?

Persistent inflation below the 1% target range supports the Bank of Thailand’s accommodative stance, with low policy rates expected to continue.

What are the risks to Thailand’s inflation outlook?

Risks include global economic slowdown, supply chain disruptions, and geopolitical tensions that could prolong deflation or delay inflation normalization.

Final Takeaway: Thailand’s inflation remains subdued but shows signs of stabilizing. Policymakers face a delicate balance to nurture growth without fueling deflation, with external risks and structural trends shaping the path ahead.

This has been drafted with AI assistance and then thoroughly reviewed, refined, and approved by our human editorial team to ensure accuracy, and originality.