ASEAN KEY DESTINATIONS
Thai rate raise looms in 2011
The central bank would like the interest rate to edge up to prevent inflation increasing prices, Paiboon Kittisrikangwan, said.
Subdued inflation and slowing economic trends in October meant the market was caught off-guard by the Monetary Policy Committee's most recent move.
The MPC's decision to increase the overnight interest rate by a quarter percentage point to 2 percent two weeks ago surprised most analysts who viewed it would add to pressure on the baht to appreciate.
Foreign funds have flooded into Thailand this year, second only in Asia to Japan. Mr. Paiboon said a growing economy next year would allow producers to increase prices more easily, as demand would be strong.
The consumer price index grew 2.8 percent year-on-year while core inflation, which removes volatile food and energy prices, increased 1.1% year-on-year in November. For the first 11 months, inflation grew 3.4 percent year-on-year.
"We expect growth to continue to be strong next year after growth estimated at 7.3 percent to 8 percent growth this year," said Mr. Paiboon.
"The growing economy will increase the output rate to close to its potential. We expect upward price pressure to increase from the third quarter of 2011 onwards."
He said upward pressure on consumer prices would also come from an increase in the oil price to US$90 per barrel and increases in metal and farm commodities.
The increases in civil servants' salaries and the minimum wage would have only a marginal impact on inflation, he added.
The increase in the minimum wage was only to a subsistence level and the rate was slightly higher than inflation, he said. As most labour positions experienced productivity increases and pay more than minimum wage, its impact on consumer prices should be negligent, Mr. Paiboon said.
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