Ministry expects salary moves to have low inflation impact

The ministry yesterday reported that the Consumer Price Index (CPI) last month had increased by 3.38 per cent year on year, because of rising prices of fuel and consumer goods.

Month on month, the CPI was just 0.39 per cent higher than in December, with consumer-goods prices having dropped in the aftermath of the floods.

Permanent secretary Yanyong Phuangrach reaffirmed the ministry’s conviction that inflation this year would be kept under control by the government at between 3.3 and 3.8 per cent, although the plan to raise the minimum wage will lead to higher prices.

He said the minimum-wage hike and the government’s new salary for new-graduate officials would only drive up inflation by 0.1-0.2 percentage point this year. However, the ministry will closely monitor the impact in the second year after the government has adjusted the structure of official salaries as a whole, he added.

The government plans to spend Bt7 billion on paying new-graduate officials this year.

Other factors that could boost inflation include an escalation of the dispute between the United States and Iran, which could lead to higher fuel prices. The impact of climate change and an influx of foreign exchange to pay for flood insurance could result in a stronger baht, which would also worsen inflation.

However, the Bank of Thailand’s decision to lower the policy rate to 3 per cent will having a restraining effect on rising prices during the year, Yanyong added.

Last month, inflation was up mainly because of higher prices in the food and beverages sector, which rose by 7.7 per cent year on year, while the non-food-and-beverage segment was up by just 0.73 per cent.

Core inflation, which excludes the volatile prices of food and fuel, was 2.75 per cent year on year in January, and 0.26 per cent compared with the December figure.

The BOT projects core inflation this year will be in a range of 0.5-3 per cent.