Banks show mixed views over policy rate

 While expecting the oil prices to ease in the second quarter and hence soften inflationary pressure, SCB is of the view that the Bank of Thailand's Monetary Policy Committee should maintain the policy rate at 3 per cent through end of this year.
 BAY however sees the acceleration in inflation in the latter half of this year, due mainly to oil prices and minimum wage hike.  It expects inflation to expand by 4-4.5 per cent in the second half, against 3.5 per cent in the first half. "The pressure may be strong enough to force a policy rate hike late this year to maintain economic stability," it said in a report.
 Thailand's March inflation was 3.45 per cent, compared to 3.35 per cent in February.
 BAY said that the acceleration speed will quicken in the second half. Minimum wage hike is estimated to push up inflation by 0.1-0.3 percentage point, but that does not take into account chain effects, it said. In case of the "second-round" effect, caused by an increase in costs and then product prices, the consequence could be higher, it warned. As consumer spending is returning to normal in the third quarter, after last year's floods, manufacturers will then be able to push partial costs from the higher wage to consumers.
 It also noted that inflation also depends largely on the government's policy on fuel subsidies as well as capital inflows which would bouy asset prices and spending.
 SCB attributed the March inflation to ready-meal prices, which account for one fourth of the consumer price index. Despite oil prices and higher wage, the bank believed that oil prices should weaken in the second quarter when global demand drops and many countries like the US would release more inventory to the market. As such, the core inflation should be well within the Bank of Thailand's target range of 0.5-3 per cent this year.