Thailand's inflation rate was the highest in close to a decade in May amid record oil prices. A slowing economy and anti-government protests may keep the central bank from raising interest rates until later this year.
Consumer prices gained 7.6 percent last month from a year earlier, the Commerce Ministry said today in Bangkok. The pace was the highest since August 1998 and exceeded all 16 economists' estimates in a Bloomberg News survey.
Surging oil prices are slowing growth in the $206 billion economy, Finance Minister Surapong Suebwonglee said May 28. Thai Prime Minister Samak Sundaravej yesterday backed down from a threat to forcibly disband street protests in Bangkok. Record fuel costs are fanning inflation across Asia. Indonesia today said consumer prices rose the most in 20 months in May.
"The inflation risk has intensified but the central bank may need to tolerate this for a while as local demand remains fragile,'' said Thanomsri Fongarunrung, an economist at Phatra Securities in Bangkok. "Raising the rate now may backfire.''
The Bank of Thailand has held its one-day bond repurchase rate at 3.25 percent since August. Policy makers, who said May 21 they are ready to adjust monetary policy should inflation accelerate, next meet on July 16.
Protests
Higher interest rates may not help cool inflation since import costs are pushing consumer prices higher, Surapong said today in Bangkok.
"The interest rate policy may be less effective,'' he said. "We will use fiscal policies, and other measures to boost incomes and economic growth to counter inflation.''
An anti-government protest, which started May 25, is being led by an activist group that spearheaded demonstrations contributing to the overthrow of former prime minister Thaksin Shinawatra in a 2006 coup. About 1,500 people are at the protest today, down from a peak of 13,000 on May 31, Surapol Thuanthong, a deputy Royal Thai Police spokesman, said today by telephone.
The benchmark SET Index of stocks fell 2.8 percent today after last week dropping the most since August. The Thai brokerage unit of DBS Group Holdings Ltd. today downgraded its SET Index rating to neutral from outperform, citing renewed political tension.
"Faster inflation and the higher cost of living because of oil prices makes people more cautious about spending money,'' said Prasarn Trairatvorakul, president of Kasikornbank Pcl, the nation's fourth-largest lender. "Political uncertainties have started to hurt investors' confidence. These are risks to economic growth.''
Core inflation, which excludes fresh food and fuel prices, accelerated to 2.8 percent in May from a year earlier, from 2.1 percent a month earlier, the Commerce Ministry said today. Economists in the Bloomberg survey estimated core inflation would be 2.5 percent.
The central bank uses core inflation to help set monetary policy and aims to keep the pace of price increases within a zero-to-3.5 percent range this year.
Confidence Falls
Consumer confidence, which fell for the first time in six months in April, may decline further in coming months as oil prices increase, Thanavath Phonvichai, an economist at the University of the Thai Chamber of Commerce said May 15.
Indonesia's consumer prices rose 10.4 percent in May from a year ago, the Central Statistics Bureau said today. India's inflation has accelerated to its fastest pace in more than 3 1/2 years.
Thailand's government on May 30 told four refineries controlled by state-owned PTT Pcl to cut diesel prices for six months to ease inflation. The measures, costing the companies about 2.2 billion baht ($67.5 million), will give cheaper fuel to buses in Bangkok. The price of diesel, widely used for transportation and manufacturing, jumped 17 percent last month, according to PTT's Web site.
``The ministry will look at all products to see what we can do to reduce the public's burden,'' Siripol Yodmuangcharoen, permanent secretary for commerce told a press briefing today.
The inflation rate in Southeast Asia's second-largest economy may be as high as 5.8 percent this year from 2.3 percent in 2007, the state planning agency forecast May 26.
Consumer prices gained 7.6 percent last month from a year earlier, the Commerce Ministry said today in Bangkok. The pace was the highest since August 1998 and exceeded all 16 economists' estimates in a Bloomberg News survey.
Surging oil prices are slowing growth in the $206 billion economy, Finance Minister Surapong Suebwonglee said May 28. Thai Prime Minister Samak Sundaravej yesterday backed down from a threat to forcibly disband street protests in Bangkok. Record fuel costs are fanning inflation across Asia. Indonesia today said consumer prices rose the most in 20 months in May.
"The inflation risk has intensified but the central bank may need to tolerate this for a while as local demand remains fragile,'' said Thanomsri Fongarunrung, an economist at Phatra Securities in Bangkok. "Raising the rate now may backfire.''
The Bank of Thailand has held its one-day bond repurchase rate at 3.25 percent since August. Policy makers, who said May 21 they are ready to adjust monetary policy should inflation accelerate, next meet on July 16.
Protests
Higher interest rates may not help cool inflation since import costs are pushing consumer prices higher, Surapong said today in Bangkok.
"The interest rate policy may be less effective,'' he said. "We will use fiscal policies, and other measures to boost incomes and economic growth to counter inflation.''
An anti-government protest, which started May 25, is being led by an activist group that spearheaded demonstrations contributing to the overthrow of former prime minister Thaksin Shinawatra in a 2006 coup. About 1,500 people are at the protest today, down from a peak of 13,000 on May 31, Surapol Thuanthong, a deputy Royal Thai Police spokesman, said today by telephone.
The benchmark SET Index of stocks fell 2.8 percent today after last week dropping the most since August. The Thai brokerage unit of DBS Group Holdings Ltd. today downgraded its SET Index rating to neutral from outperform, citing renewed political tension.
"Faster inflation and the higher cost of living because of oil prices makes people more cautious about spending money,'' said Prasarn Trairatvorakul, president of Kasikornbank Pcl, the nation's fourth-largest lender. "Political uncertainties have started to hurt investors' confidence. These are risks to economic growth.''
Core inflation, which excludes fresh food and fuel prices, accelerated to 2.8 percent in May from a year earlier, from 2.1 percent a month earlier, the Commerce Ministry said today. Economists in the Bloomberg survey estimated core inflation would be 2.5 percent.
The central bank uses core inflation to help set monetary policy and aims to keep the pace of price increases within a zero-to-3.5 percent range this year.
Confidence Falls
Consumer confidence, which fell for the first time in six months in April, may decline further in coming months as oil prices increase, Thanavath Phonvichai, an economist at the University of the Thai Chamber of Commerce said May 15.
Indonesia's consumer prices rose 10.4 percent in May from a year ago, the Central Statistics Bureau said today. India's inflation has accelerated to its fastest pace in more than 3 1/2 years.
Thailand's government on May 30 told four refineries controlled by state-owned PTT Pcl to cut diesel prices for six months to ease inflation. The measures, costing the companies about 2.2 billion baht ($67.5 million), will give cheaper fuel to buses in Bangkok. The price of diesel, widely used for transportation and manufacturing, jumped 17 percent last month, according to PTT's Web site.
``The ministry will look at all products to see what we can do to reduce the public's burden,'' Siripol Yodmuangcharoen, permanent secretary for commerce told a press briefing today.
The inflation rate in Southeast Asia's second-largest economy may be as high as 5.8 percent this year from 2.3 percent in 2007, the state planning agency forecast May 26.
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