Thailand's Inflation Holds at 3%, Supporting Case for Higher Interest Rate
Thai inflation held at 3 percent last month after accelerating in December, supporting the central bank’s case to raise borrowing costs again.
An index of consumer prices increased 3.03 percent in January from a year earlier, the Ministry of Commerce said in Nonthaburi province outside Bangkok today. The median estimate of 17 economists in a Bloomberg News survey was for a 3 percent gain, the same pace as in December.
Thailand joined India and South Korea in extending interest-rate increases in January as emerging markets battle inflation spurred by economic expansion, higher energy costs and more expensive food. The Bank of Thailand needs to raise rates again as consumer-price growth is the “key” risk, Governor Prasarn Trairatvorakul said last week.
“Going forward, inflation pressure will continue to build up in tandem with domestic demand and rising wages,” Julia Goh, an economist at CIMB Investment Bank Bhd. in Kuala Lumpur, said before the release. She expects the policy rate to reach 3 percent by the end of 2011 from the current 2.25 percent.
The Bank of Thailand raised its one-day bond repurchase rate for the fourth time in seven months on Jan. 12, by a quarter of a percentage point.
Core inflation, which the monetary authority uses to guide policy, is forecast at 2 percent to 3 percent this year, though “there is higher possibility it will exceed the top end of the central bank’s target” of 3 percent, Assistant Governor Paiboon Kittisrikangwan said last month.
Core Inflation
Thailand’s core inflation index, which excludes fresh food and fuel prices, rose 1.32 percent in January from a year earlier, the commerce ministry said. The median estimate in a Bloomberg News survey of 14 economists was for a 1.4 percent gain.
The ministry began issuing inflation data with two decimal places from today’s report.
“Inflation didn’t accelerate as much as many had expected because the ministry has controlled product prices to try and keep inflation in the 3.2 percent to 3.7 percent forecast range,” Permanent Secretary for Commerce Yanyong Phuangrach said at a briefing today.
Prime Minister Abhisit Vejjajiva’s government has raised the daily minimum wage and is due to boost the salaries of civil servants, which may spur inflation. At the same time, the government is subsidizing diesel, cooking gas and electricity charges and last week approved 39 products, including cooking oil, pork and eggs, to fall under the price control program.
Election Signal
Abhisit last week signaled he may call an election as early as April after protesters blocked some Bangkok streets to pressure the government over a border agreement with Cambodia. The baht has fallen about 2.6 percent over the past month against the dollar, one of the biggest slides in Asia, after the demonstrations and unrest in Egypt hurt investor confidence.
Domestic political uncertainty may “complicate the path of interest-rate normalization,” CIMB’s Goh said.
The central bank estimates Southeast Asia’s second-biggest economy expanded 8 percent in 2010, which would be the fastest pace in 15 years, and forecasts 3 percent to 5 percent growth this year.
To contact the reporters on this story: Suttinee Yuvejwattana in Bangkok at Suttinee1@bloomberg.net
To contact the editor responsible for this story: Tony Jordan at tjordan3@bloomberg.net; Stephanie Phang at sphang@bloomberg.net
Rate this Page