Govt acts to soothe price fears

After an urgent meeting called by Prime Minister Yingluck Shinawatra, top economic officials said the Cabinet would monitor key factors, particularly oil prices and the new minimum wage. No economic, financial or monetary measures were announced.

The government played down the rise in fuel prices, pointing out that high inflation in January was largely caused by lost production in the aftermath of the flood crisis. The nationwide disaster severely affected manufacturing of goods, which failed to meet demand, resulting in higher prices of foods and beverages. The prices were within normal levels, however, officials said.

Amid the public outcry over rising food prices, Yingluck called an urgent meeting of economic ministers including the finance, commerce, labour and industry ministers, as well as officials from the Bank of Thailand and the National Economic and Social Development Board (NESDB), to brainstorm ways of tackling the high inflation.

Kittiratt Na-Ranong, deputy prime minister and finance minister, said the government was not overly worried about the prices of goods, but would closely monitor certain goods throughout their supply chains to identify problems. In addition, energy costs would be monitored. 

The government has no policy to subsidise energy costs further, but will promote energy conservation among the public and all government agencies, he said.

“Prime Minister Yingluck has ordered all government agencies to reduce energy use by 10 per cent,” Kittiratt said.

The government believes that prices of liquefied petroleum gas (LPG) and natural gas for vehicles (NGV) will come under control. The government will not implement any measures that will cause price increases, he said. 

The BOT yesterday signalled that there would be no increase in the policy rate in the next six months, given stable inflation expectations.

“Inflation expectations remain stable as per the BOT’s survey. Inflation is unlikely to be a serious problem in the next six months. There won’t be a need for any broad-based measures,” BOT Governor Prasarn Trairatvorakul said.

However, crude-oil prices and the effect of government measures such as the increase in the minimum wage and civil service salaries and other government expenses will be closely monitored, he said.

The Dubai crude-oil price has risen to about US$120 per barrel on tensions in the Middle East.

Commerce Minister Boonsong Teriyaphirom said the ministry’s latest survey on goods prices on  Tuesday showed that some fresh-food prices have declined from the same period last year. The cost of red pork has dropped from Bt99-Bt104 per kilogram last year to Bt80-Bt90 this year, and chicken fell from Bt59-Bt60 to Bt42-Bt44. However, the price of large and medium-sized lemons increased from Bt2.50-Bt3.00 to Bt3.90-Bt4.20 each this year.

He said rising oil prices would affect logistics costs by 0.44 per cent. 

Prasarn attributed the recent spike in goods prices in part to inflation expectations based on the upward trend in oil prices due partly to geopolitical tension in the Middle East.

To keep inflation in check, the central bank will undertake periodic surveys on the inflation expectations of business operators and consumers, to see what they forecast for the next three, six and nine months. Prasarn noted that in anticipation of higher inflation, operators tended to raise product prices while consumers started to hoard.

“What worries us is the oil prices. Every 10-per-cent increase in the oil price boosts the Consumer Price Index by 0.3-0.4 of a percentage point. Inflation expectation is the culprit now,” he said.