Inflation not expected to exceed 3.3% on stable prices, economic growth
With goods prices expected to remain stable and economic growth strong, the Commerce Ministry is confident that inflation will be 3.3 per cent this year, putting less pressure on the government to increase the interest rate.
The ministry reported yesterday that July inflation grew 2.73 per cent year on year, up 0.35 percentage point from the previous month. The ministry attributed the increase to higher food and fuel prices.
Commerce Permanent Secretary Yanyong Phuangrach said that inflation had risen in a stabilised manner and this should ensure that the annualised level would not exceed the target of 3.3-3.8 per cent.
Annualised inflation would be 3.3 per cent this year as inflation in the third and fourth quarters of the year would be 3.2-3.3 per cent, said Yanyong.
The consumer price index in the first seven months of the year rose 2.92 per cent year on year.
He said the Bank of Thailand should not worry about rising inflation as it has normally been under control during the past few years. The decision whether to increase the policy rate should be based on influx of capital and import of goods.
Yanyong added that although the Energy Regulatory Commission is expected to increase the fuel tariff by another 30 satang per unit for electricity from September to December this year, it would have only a small impact on this year’s inflation, or cause higher annual inflation by only 0.082 percentage point.
The softening of the increase in inflation last month reflected a small rise in the food and beverage sector by 0.47 per cent, and rise of the non-food sector by 0.2 per cent, mainly higher fuel price.
In July, core inflation rose 1.87 per cent year on year and up slightly by 0.03 percentage point from June’s figure. Core inflation in the first seven months was up 2.3 per cent year on year, well within the Bank of Thailand’s projection at 0.5-3 per cent.
In addition, the ministry reported that the Consumer Confidence Index improved slightly from 27.6 points in June to 29.1 last month, thanks to the stable political situation, stable goods prices, and the government’s measures to boost dropping rubber price.
However, there are still risk factors affecting confidence in the future, including worries about the euro-zone crunch, increase in fuel price, the turmoil in the deep South, and the outbreak of hand, foot, and mouth disease.
