Export concerns key in policy rate decision

The ministry reported that the year-on-year rise in the Consumer Price Index had slowed last month to 2.42 per cent, from 2.69 per cent in March. Month on month, inflation was 0.16 per cent, mainly due to prices of fresh vegetables, fruit and meat rising because of the hot and dry weather.

 Over the first four months, the CPI climbed 2.92 per cent from the same period last year.

 Commerce permanent secretary Vatchari Vimooktayon said the ministry was now confident inflation this year would be stable at about 3.2-3.2 per cent, comfortably below the projection of 3.4 per cent.

 “With stable fuel and goods prices, inflation should be steady. Inflation is not, therefore, a factor that the central bank should be concerned about,” she said, adding that the bank has full authority to manage the currency and take any measures, including cutting the policy rate, to ensure the baht is not so strong that it damages the export sector.

 Concerned over the impact of the baht’s strength on exporters, the ministry will on May 16 hold a meeting with 300 small and medium-sized exporters to listen to their views on how the government could support them in the current exchange-rate climate.

 Before that, the ministry next week will meet representatives from a number of industrial sectors to discuss their export problems this year. The meeting will concentrate on how to drive export growth amid the baht’s appreciation, |she said.

 Vatchari insisted that inflation should fall within the ministry’s forecast range of 2.8-3.4 per cent this year on expected stable goods prices, lower fuel costs in the global market and the extension of the government’s cost-of-living relief measures to September.

 Whether the authorities decide to lower the policy rate is up to the Bank of Thailand’s Monetary Policy Committee, but inflation is not a factor to worry about, she said.

 The ministry’s 2013 inflation projection assumes an exchange rate of Bt28.5-Bt32.5 against the US dollar, and an average Dubai crude-oil price of US$100-$120 per barrel.

 The slide in the CPI last month was mainly due to a 0.33-per-cent decline in the non-food-and-beverage index, while the food-and-beverage index rose by 6.3 per cent, mainly on an increase in the prices of fruit and vegetables as the country entered the drought season.

 In regard to the impact of transportation costs increasing on the BTS Skytrain and expressways, and the rising price of liquefied petroleum gas (LPG), the ministry said it expected a small impact of only 0.01 per cent on inflation this year.

 The BTS is weighted at 0.05 per cent in the ministry’s inflation calculation, expressway fees at 0.07 per cent, and LPG at 0.31 per cent.

 Core inflation last month was 1.18 per cent year on year, and 0.06 per cent month on month.

 Core inflation in the first four months was 1.39 per cent year on year, well within the Bank of Thailand’s target band of 0.5-3 per cent.