More rate hikes anticipated: Tisco

 "Though cost push inflation pressure declines due to lower oil prices, but demand pull pressure remains high as individual spending tends to rise on higher oil consumption. Meanwhile, inflation should remain high due to the government's economic stimulus programme," Tisco said in its research note.

This week, Brazil's central bank cut its policy rate by 50 basis points to 12 per cent, while the European Central Bank is expected to cut the interest rate from 1.50 per cent in light of possible double-dip recession in the eurozone.

Tisco expects Thailand's headline inflation in 2011 should drop to 3.7 per cent due to the oil subsidies, against its previous forecast of 3.9 per cent. It also targets headline inflation in 2012 at 3.4 per cent, from previous forecast of 3.5 per cent.

 It added that it remains unclear when rate hikes would happen next year, due to the energy subsidy which would lower headline inflation. However, it said that the core inflation will peak in the first quarter of 2012. Inflation could also accelerate due to the rice pledging programme, the minimum wage hike and salary increase for fresh graduates.

  "The discrepancy in headline and core inflation direction may affect the policy rate hike timing," it said.

 The suspension in Oil Fund levy on three fuel products as well as the extension in diesel excise tax cut would cost the government a total of Bt97.8 billion or Bt540 million a day, if the subsidies are in effect for six months or until end-March. 

 In August, headline inflation was 4.29 per cent while core inflation, excluding volatile food and fuel prices, was 2.85 per cent from the same period last year. Pushing inflation above target was the 21.1 per cent increase in meat prices, as meat contributes 16 per cent of the fresh food price index. Processed food prices also rose 9.7 per cent, the highest since January 2009.