Thailand: Inflation rises to seven-month high
April 1, 2011
In March, consumer prices rose 0.49% over the previous month, which was above the 0.40% increase tallied in February. The monthly rise reflected higher prices for food and beverages as well as for fuels. Annual inflation rose from 2.9% in February to 3.1% in March, which was in line with market expectations and marked the highest rate since August 2010. The core inflation index, which excludes more volatile categories from the consumer price index, rose 0.29% over the previous month, driving annual core inflation to 1.6% in March (February: 1.4% year-on-year), which represented the highest rate since February 2009. The reading suggests that, in addition to external pressures, strong domestic demand is also contributing to inflationary pressures. At the current level, core inflation remains within the Central Bank's target rate of 0.5% - 3.0%. In addition to increases in global oil and commodity prices, recent floods in the country's southern provinces are likely to lead to higher prices for agricultural products and construction materials, together with rising demand. Accordingly, the Ministry expects inflation to reach between 3.2% and 3.7% this year. Meanwhile, the Bank of Thailand expects headline inflation to remain between 2.5% and 4.5% this year and between 2.0% and 4.0% next year.
Author: Ricardo Aceves, Senior Economist