Inflation In 2008 Reaches 11-year High

[sriracha john]

2008 Inflation reaches 11-year high

The Bank of Thailand (BOT) forecast headline inflation would reach an 11-year high at 7.5-8.8 per cent, while core inflation would break the policy target to 2.8-3.8 per cent this year marking the first time since inflation targeting was introduced in 2000.

The BOT core inflation target is 0 to 3.5 per cent. Core inflation excludes the price of oil and food.

Duangmanee Vongpradhip, the central bank assistant governor said skyrocketing inflation was a result of high volatility from oil and commodity prices, which has caused headline and core inflation rates climbing up relentlessly the past months, far exceeding its expectations.

The surge has significantly lowered the purchasing power of consumers, a trend that is expected to prevail next year.

Core inflation is likely to exceed the target of 3.5 per cent to as much as 4 per cent next year, while the headline inflation number is estimated to between 5 and 7.5 per cent.

The Kingdom's economic growth forecast, however, was revised slightly lower to 4.8-5.8 per cent from 4.8-6 per cent.

It was expected to range between 4.3-5.8 per cent next year, compared with 4.5-6 per cent in the previous estimation.

Duangmanee dismissed concerns that the new target may be breached, saying the situation was fueled by external factors beyond our control.

But the BOT continued to closely tackle the problem and bring it back on track over the next eight quarters.

"It is not a mistake that core inflation had risen beyond the target of 3.5 per cent if we can explain it and bring it down. Many central banks also faced core inflation rate exceeding their targets," she said.

The inflation rate could continue to surge, spurred by inflation expectations even though oil and commodity prices had eased, she warned.

According to the Monetary Policy Committee (MPC), core inflation could possibly exceed the new target for a while, if policy interest rate is at 3.5 per cent per year over the next eight quarters.

It considered the upside risk to inflation from continued inflation expectations, surging oil and commodity prices and a weaker baht.

The BOT signalled that an inflation ceiling of 3.5 per cent was not a proper target under the current situation.

The new target will be jointly set by the Ministry of Finance and the BOT when new board members and a Monetary Policy Committee had been approved.

High inflation has apparently eroded consumption and investment while exports could grow higher than expected, thanks to global demand.

The BOT estimated total consumption to grow 3-4 per cent this year, compared with a previous forecast of 4.5-5.5. Total investment is projected to expand 4.3 - 5.3 per cent, lower than 8.5-9.5 per cent in earlier projection. Export value would expand by 16-19 per cent, compared with the previous forecast of 13.5-16.5 per cent. This is under the assumption the world economy would grow 4.8 per cent this year, improving from an earlier projection of 4.3 per cent.

Duangmanee said the government's latest stimulus package may boost growth slightly by 0.1-0.3 per cent.

- The Nation

[sriracha john]

Thai Central Bank Ups Inflation Forecast

(RTTNews - 1 hour ago) - The Thai central bank raised its inflation forecast for 2008 and 2009 on expectations that world oil prices could increase higher than the baseline assumption and the pass-through of costs of production to prices of goods and services could increase, partly as a result of rising inflation expectations. At the same time, the central bank lowered its upper band of 2008 growth forecast and slashed growth outlook for 2009.

According to the inflation report for July released on Monday, the Bank of Thailand hiked its inflation forecast for 2008 to an average 7.5%-8.8% from 4%-5% predicted in April. Inflation forecast for 2009 is hiked to 5%-7.5% from 2.8%-4.3% estimated previously.

The central bank noted that the core inflation would remain higher. According to the latest report, the core inflation is expected to be in the range of 2.8%-3.8% in 2008, up from an earlier forecast of 1.5%-2.5%. For 2009, the central bank sees the core inflation to remain elevated in the range of 3%-4%, revising from 2%-3%.

However, the apex bank expects appropriate monetary policy would help contain inflation expectations and facilitate a faster return of core inflation to within the target range of 0%-3.5%.

At the same time, the central bank lowered its upper band of 2008 growth forecast. The Bank of Thailand now projects the economy to grow 4.8%-5.8%. In its April inflation report, the central bank had predicted the economy to grow at an average 4.8%-6%. For 2009, the central bank foresees GDP growth to range between 4.3%-5.8%, down from an earlier estimate of 4.5%-6%.

Edited July 28, 2008 by sriracha john

[NoSpeakIt]

could get even worse as more US banks continue to fold and all commodities head up and all currencies head down

[sriracha john]

on his way out the door, the Finance Minister voices encouragement... sort of

Finance Minister confident inflation speed up to ease in 2nd half

BANGKOK, July 30 (TNA) – Thailand's Finance and Deputy Prime Minister Surapong Suebwonglee on Wednesday expressed confidence that the acceleration of the country's inflation rate would ease during the second half of this year in tandem with the global oil price decline.

He said that inflationary pressures had now reduced their speed due to the downward trend of oil prices.

However, the decline in the rate of acceleration was not as sharp as many wanted.

Meanwhile, Government Pension Fund Secretary-General Visit Tantisuntorn predicted that the inflation rate this year would surge to 9-10 per cent, the highest in a decade, if oil prices continued to stay at the current high level.

He said the continued rise in fuel prices for more than two years had affected economies around the world, pushing up inflation rates and the cost of living without let interruption.

Visit warned that rising inflation will not only worsen Thailand's economic and social conditions, but also undermine the overall picture for investment. Should fuel prices continue to stay high, inflationary pressures will mount, finally affecting production costs in all sectors.

The situation is unfavourable to the money and capital market. So, it is necessary for GPF to closely monitor the economic conditions and adjust its strategy for investment to meeting the changing environment.

[slapout]

It would be nice if the present government had a knowledgeable individual or group who could combine all the determineing factors, use a consistent yardstick, when using the word 'if' propose worst and best cases projections, and then tell the public that this is their best guess, subject to revision every 2 weeks. Then tell the other self proclaimed financial experts to use the same guidelines and when in disagreement with other Bull sh.ters, to show the errors made in past assesment and why their bs is to be believed. If undecided read TV and get the latest thoughts and theories which are probably more concise and thought out??? by individuals are just as qualified.

[sriracha john]

July figures out show it's getting worse...

Consumer Price Index surges 9.2% in July; 10 year high

BANGKOK, Aug 1 (TNA) – The Consumer Price Index (CPI) in July surged 9.2 per cent year on year and 0.3 per cent month on month to stay at 128.1, the highest in a decade, due mainly to continued high oil prices, according to the Commerce Ministry.

Deputy Permanent Secretary for Commerce Pairoh Sudsawad said the core CPI or inflation rate in July soared 3.7 per cent from the same month last year and 0.2 per cent from the previous month.

She said the CPI in the first 7 months of this year rose by 6.6 per cent on average and the core CPI by 2.4 per cent.

The ministry attributed the sharp increase in CPI in July to continued high fuel prices, said Pairoh.

However, it believed that CPI would increase by around 5.5 per cent as earlier expected after the government issued six relief measures to ease people's hardship from higher living costs. It said that the implementation of the measures would help slow the acceleration of the inflation rate.

[cloudhopper]

July figures out show it's getting worse..

The ministry attributed the sharp increase in CPI in July to continued high fuel prices, said Pairoh.

I guess we'll find out soon enough if that's really the case now that oil prices have dropped sharply.