Thai inflation climbs to new 10-year high

Bangkok: Thailand's annual inflation rate surged to a new 10-year high of 9.2 per cent in July, slightly below analysts' expectations but still piling pressure on the central bank to raise interest rates.

The Bank of Thailand is expected to raise rates at its next meeting on August 27 despite June economic data on Thursday that showed slowing consumption and investment growth.

The rise in the consumer price index, published by the Commerce Ministry yesterday, was just below analysts' forecasts of 9.3 per cent and compared with 8.9 per cent in June and 7.6 per cent in May.

Driven by soaring oil and food prices, inflation shot up from an average of just 2.3 per cent in 2007. The last time annual inflation was higher was in July 1998, when it hit 10.0 per cent.

"The central bank will probably raise by another 25 basis points at the next meeting. Not 50 points," economist Poramet Tongbua of Tisco Securities said.

"At this level, it's not a concern. If you compare with others in the region, we're still going alright. August inflation should be about 9.6-9.7 per cent," he said.

Core annual inflation, which excludes energy and fresh food prices, picked up slightly to 3.7 per cent in July from 3.6 per cent in June. That was below the 3.8 per cent analysts had expected.

The July core inflation breached the BoT's target ceiling of 3.5 per cent for the second straight month.

The Bank of Thailand raised its policy rate by 25 basis points to 3.50 per cent in mid-July, the first rise in two years. The central bank lifted its 2008 inflation forecast last month to an average of 7.5-8.8 per cent from 4.0-5.0 per cent it had forecast in April.

The central bank expects economic growth this year to at least match last year's 4.8 per cent expansion with the help of increased state investment in infrastructure. Its latest forecast puts 2008 growth in a 4.8-5.8 per cent range.