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NEWS UPDATES 3 April 2010

Slow inflation to keep rate hike at bay

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Thailand's inflation rate slowed last month, official data showed Thursday, dampening speculation of an imminent interest rate hike by the central bank to prevent the economy overheating, reported AFP.

Thai consumer prices rose 3.4 percent in March, for a sixth straight year-on-year gain, the commerce ministry said.

But the increase was more moderate than a 3.7 percent jump seen in February and fell short of the forecasts of analysts, who are watching closely for any signs the Bank of Thailand (BOT) will raise official borrowing costs.

The central bank meets on April 21 but is likely to hold off until June to start tightening monetary policy in light of the slowing inflation and political uncertainty, said Standard Chartered Bank economist Usara Wilaipich.

"The BOT won't hike its key rate in the upcoming meeting as (the) local political situation remains a risk factor," she told Dow Jones Newswires.

Thailand's central bank left its key interest rate unchanged at 1.25 percent at a meeting on March 10, citing the country's political instability including mass anti-government protests. But with Asian economies at the vanguard of a global economic recovery, analysts have not ruled out a 25-basis-point Thai rate hike this month.

"Overall, the economic data released over the past two days continues to support our view that the growth recovery is taking a more definite shape in the domestic economy," Barclays Capital analysts wrote in a note.

In March, food prices were up 4.4 percent as hot weather affected produce such as fresh food and fruit, while the non-food sector gained 7.4 percent. Core consumer prices, excluding food and energy, rose 0.4 percent year-on-year. "Inflation has returned to normal," the commerce ministry said, maintaining its forecast for an annual inflation rate of 3.0-3.5 percent in 2010.


 

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