BOT retains 2.8% inflation forecast despite January surge
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The inflation forecast for this year stays at 2.8 per cent despite January's 3.39-per-cent figure, as capital inflows will not likely push up prices, the Bank of Thailand said yesterday.
“We considered the average annual figure. Now, there’s no need to revise our estimate. If the government changes its policy on excise taxes on diesel, we may have to review it,” said Songtum Pinto, director of the central bank’s Monetary Policy Office.
January’s inflation reading of 3.39 per cent from the Commerce Ministry was close to the BOT’s estimate, he said.
The recent large influx of capital has not fuelled inflation directly, Songtum said. Inflation is mainly pulled by domestic demand and pushed by costs. Currently, domestic demand, including consumption and investment, is very strong.
“There will be a number of connections if capital movement does affect inflation,” he said.
Raising the policy rate would have a minimal influence on capital flows, which depend more on returns, exchange rates, the economic situation and the risks in a country.
“Comparing Thailand with other regional countries with similar economic conditions, we find that Thailand’s real interest rate remains negative and the lowest in the region,” he said.
The interest-rate policy acts on the economy in many aspects, Songtum said. Of the country’s gross domestic product, 60 per cent comes from consumption, 20 per cent from investment and nearly 20 per cent from state expenditures.
