Thailand inflation slows ahead of central bank rate decision

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(Bloomberg) – Thailand’s core inflation rose to its highest level since 2008 on rising energy and food costs, putting pressure on the country’s central bank to keep the pace. ‘she’s starting to raise interest rates.

Gains in core prices, which exclude volatile food and oil, were 3% in July, up from 2.51% a month earlier and more than the median of 2.63% predicted by economists in a survey Bloomberg, according to official data released Friday. The headline inflation rate came in at 7.61% last month, slower than the 8% forecast and slightly below June’s 7.66%.

The higher core CPI print could give the Bank of Thailand the boost it needs to raise rates when its monetary policy panel meets next week. The 15 economists polled by Bloomberg on Friday morning see the BOT raising the policy rate by a record 0.5% to rein in inflation, which has remained above the central bank’s target this year despite billions dollars spent on state subsidies to alleviate the cost of living.

“We believe the August policy rate hike is likely a done deal, but the decline in headline inflation, amid sharply falling fuel prices, suggests that the risk of an aggressive policy tightening is weak,” said Charnon Boonnuch, analyst at Nomura Holdings Inc.

BOT Governor Sethaput Suthiwartnarueput said rate hikes will be gradual to ensure the higher cost of borrowing does not derail the economy’s recovery. A better-than-expected rebound in tourism, which accounted for about a fifth of Thailand’s economy and jobs before the pandemic, could also give the central bank a chance to begin policy normalization.

Nomura expects BOT to raise its policy rate by 25 basis points on Aug. 10 and continue with similar hikes in its next three meetings, Charnon said.

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