Thai June inflation beats forecast as rate hike looms

THAILAND'S headline inflation outstripped forecasts to hit a near 14-year high in June, reinforcing expectations of a rate hike as early as next month, and with the commerce ministry warning price pressures will extend into the third quarter.

The headline consumer price index (CPI) rose 7.66 per cent from a year ago, driven up by higher energy prices and also affected by base effects, the ministry said on Tuesday (Jul 5).

The figure beat a forecast 7.50 per cent rise in a Reuters poll and compared with May's 7.10 per cent rise.

The CPI in the current quarter is expected to rise at a similar pace as the second quarter's 6.46 per cent, ministry official Ronnarong Phoolpipat told a news conference.

Consumer prices, however, should fall sharply in the final quarter of the year due to last year's high comparative figures, he said.

While the pace of inflation was difficult to predict due to various factors including a weak baht, the ministry was maintaining its forecast for average headline inflation of 4.5 per cent this year. In 2008, inflation was 5.5 per cent.

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The central bank, however, expects headline inflation of 6.2 per cent for this year, above its target range of 1 per cent to 3 per cent.

The central bank is widely expected to hike its policy rate from a record low of 0.50 per cent at its next meeting on Aug. 10 to contain rising inflation.

The core CPI index, which strips out energy and fresh food prices, rose 2.51 per cent from a year earlier, also beating a forecast 2.37 per cent rise, and compared with May's 2.28 per cent increase. REUTERS