Bloomberg News

Thai Inflation Quickens First Time in Five Months on Oil

April 03, 2012

Thai inflation accelerated for the first time in five months in March on rising oil prices, posing a risk to the nation’s recovery after last year’s flood crisis, and limiting the scope for further interest-rate cuts.

An index of consumer prices climbed 3.45 percent from a year earlier, the Ministry of Commerce said in Nonthaburi province outside Bangkok today. That compared with a 3.35 percent increase reported for February. The median of seven estimates in a Bloomberg News survey was for a 3.2 percent pace.

Retail fuel prices in Thailand have risen more than 20 percent since the start of the year on costlier crude and lower state subsidies, Energy Policy and Planning Office data show. Central bank Governor Prasarn Trairatvorakul, who kept interest rates unchanged last month after two previous cuts, has said inflation may accelerate later on oil and higher minimum wages.

“Despite higher oil prices, we think overall inflation will remain manageable,” Julia Goh, an economist at CIMB Investment Bank Bhd. in Kuala Lumpur, said before the release.

Wage rises and strengthening demand may pose risks to inflation later this year, “but the probability of a rate hike remains low at this point,” she said, adding they expect the policy rate to stay at 3 percent until year-end.

Core inflation, which excludes fresh food and fuel prices, was 2.77 percent last month. The central bank uses the measure to guide monetary policy and aims to keep it at less than 3 percent. The median of seven estimates in a Bloomberg News survey was for a reading of 2.5 percent.

“The inflation pressure in Thailand is still benign compared to other neighboring countries,” Yanyong Phuangrach, the permanent secretary for commerce, said at a briefing today, adding he expects consumer prices will remain “well within our target of between 3.3 percent and 3.8 percent this year.”

Wages in Bangkok and six other provinces will rise to 300 baht ($9.7) a day from this month, according to the labor ministry. In the rest of the country, pay will initially climb an average of 40 percent, and to 300 baht per day by 2013.

The finance ministry last month raised its growth forecast this year to 5.5 percent.

To contact the reporter on this story: Suttinee Yuvejwattana in Bangkok at suttinee1@bloomberg.net

To contact the editors responsible for this story: Tony Jordan at tjordan3@bloomberg.net; Stephanie Phang at sphang@bloomberg.net


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