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Thailand's retail inflation accelerated at the fastest pace since 2008 as the net oil importer struggled to cope with rising energy and fresh food costs, posing a policy dilemma for the central bank that's kept interest rate at a record low to support a nascent economic recovery.
The consumer price index rose 5.28% in February, the most since Sept. 2008, sending the core inflation reading to 1.8%, the Commerce Ministry said Friday. The headline inflation was well above the Bank of Thailand's target range of 1% to 3% and beat the 4.05% consensus among analysts in a Bloomberg survey.
There is unlikely to be any immediate relief from rising prices, with the government having little control on supply side factors such as spiralling crude oil prices, Trade Policy and Strategy Office Director-General Ronnarong Phoolpipat told reporters. Prime Minister Prayuth Chan-Ocha's government has capped diesel prices and extended subsidies on gasoline to minimize the hit from steep oil prices but the measures are likely to fuel a budget deficit.
The Commerce Ministry is confident that the central bank and the Finance Ministry have enough tools to manage Thailand's economy and that average inflation will be in line with target this year, Ronnarong said.
The Bank of Thailand last month said the average headline inflation will accelerate to more than 2% this year, compared with its December forecast of 1.7%. While it's the second straight month that inflation breached central bank's target, BOT officials have maintained prices will remain elevated in the first half before easing.
“It's not appropriate to use monetary policy to tackle the spike in inflation caused by supply side problems such as rising oil and food prices,” said Amonthep Chawla, head of research at CIMB Thai Bank Pcl in Bangkok. “Fiscal policy will need to take the lead.”
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