June 1 (Bloomberg) -- Thailand's inflation rate increased in May to its fastest pace in more than six years as higher fuel prices pushed up transport costs.

Consumer prices rose 3.7 percent from a year earlier, the highest since December 1998, accelerating from a 3.6 percent gain in April, Dhumnoon Cheosakul, deputy permanent secretary at the Ministry of Commerce, told a press briefing today in Bangkok. The increase matched the median forecast of eight economists in a Bloomberg survey.

The Bank of Thailand, which forecasts inflation will accelerate to 4 percent this year from 2.7 percent in 2004, has increased interest rates four times in nine months. Assistant Governor Atchana Waiquamdee said on April 20 that rates in Southeast Asia's second-biggest economy remain on an ``upward path'' because of inflationary pressures.

Consumer prices could rise higher in the next few months after Prime Minister Thaksin Shinawatra's government said yesterday it would cap its subsidy of retail fuel prices.

From April, consumer price index rose 0.6 percent, the ministry said. In the five months, consumer prices rose 3.2 percent from the same period a year earlier.

Core consumer prices, which exclude food and fuel, last month rose 1.2 percent from a year earlier compared with a 0.8 percent gain in April, the commerce ministry said today.

The central bank's Monetary Policy Board will meet on June 9 to discuss its key interest rate.

To contact the reporter on this story: Anuchit Nguyen in Bangkok at anguyen@bloomberg.net

Last Updated: June 1, 2005 03:55 EDT