By Orathai Sriring and Kitiphong Thaichareon

BANGKOK Thailand's annual headline inflation was weaker than expected in July, helped by lower food and energy prices, and the commerce ministry said on Monday it projected smaller consumer price rises for the rest of the year.

The headline consumer price index (CPI) increased 0.38% in July from a year earlier, compared with a forecast rise of 0.64% in a Reuters poll, and against June's 0.23% rise.

It was the third successive month headline inflation was below the central bank's target range of 1% to 3%.

The headline CPI in August could rise slightly as some food prices pick up due to drought, while energy prices are likely to increase, Poonpong Naiyanapakorn, head of the ministry's trade policy and strategy office, told a press conference.

Average headline inflation, however, should remain low at 0.36% in the second half of 2023, he added.

"We think it's lower than 1% every month in the remaining five months. But worrying factors are drought and oil prices," he said.

On Monday, the commerce ministry maintained its prediction of average annual headline inflation at 1% to 2%, which would be reviewed in September, Poonpong said.

A delay in the formation of a new government has yet to affect consumers' purchasing power, he added.

In July, the core CPI rose 0.86% from a year earlier, compared with a forecast for a 0.90% rise in the poll, and against June's 1.32% increase.

Last week, the central bank raised its key interest rate for a seventh straight meeting to 2.25% as inflation risks lingered. It will next review monetary policy on Sept. 27.

In the January-July period, the headline CPI rose 2.19% year-on-year, with the core CPI up 1.73%, the ministry said.

(Reporting by Orathai Sriring and Kitiphong Thaichareon and Satawasin Staporncharnchai; Editing by Martin Petty and Sam Holmes)