Inflation quickens to 13-month high

Thailand's inflation accelerated to a 13-month high in December, exceeding economists' estimations, as state subsidies failed to counter rising food prices.

An index of consumer prices rose 3.63%  last month from a year earlier, the Ministry of Commerce said in Nonthaburi province outside Bangkok on Wednesday, compared with a 2.74% increase reported earlier for November. The median estimate of 12 economists in a Bloomberg News survey was 3.22%.

The Bank of Thailand cut the benchmark interest rate twice last year to support the economy as it recovered from the floods of 2011 and global demand for its exports weakened. The government has raised minimum wages and offered a diesel-tax subsidy to boost consumption, while the monetary authority has forecast inflation will slow to 2.8% this year.

"We expected the central bank to leave the key rate unchanged at least in the first half, unless there is an unexpected shock to the global economy," Sarun Sunansathaporn, an economist at Tisco Securities Co in Bangkok, said before the release. 

Mr Sarun said there is a chance they may start raising the rate in the second half if food-price inflation and the impact from the wage increase kick in.

The government last month extended the diesel-tax cut to end-January and approved a new round of increases in the daily minimum wage to 300 baht (US$9.8) from the beginning of this year, after a similar raise in April last year in seven provinces including Bangkok.

Consumer prices rose 0.39% in December from the previous month, according to Wednesday's report. Inflation averaged 3.02% in 2012, the ministry said, predicting price gains of 2.8% to 3.4% in 2013.

Core inflation, which excludes fresh food and fuel costs, was 1.78% last month and averaged 2.09% last year. The central bank uses the measure to guide policy and expects price gains will stay below its target of 3% this year, the ceiling also for last year.

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Writer: Bloomberg News
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