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Double-digit Thai inflation "might be possible" - cenbank

Fri Jun 13, 2008 8:43am IST
 
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BANGKOK, June 13 (Reuters) - Thailand's inflation could reach double-digit levels if consumers feel compelled to buy because they fear prices will be more expensive in the future, Bank of Thailand Governor Tarisa Watanagase said.

Tarisa said raising interest rates would normally slow inflation by reducing consumer spending, but it might also backfire if it induced people to spend more to beat rising prices fuelled by soaring oil costs.

"Psychologically, people might rush to spend more if they expect sharply higher inflation ahead," Tarisa told Reuters late on Thursday.

"If that is the case, it might be possible," she said when asked if Thai inflation could hit double digits later this year.

Thailand's annual inflation rate rose to a near 10-year high of 7.6 percent in May after a 6.2 percent rise in April, and analysts say it could go higher.

The Bank of Thailand has kept its policy interest rate unchanged at 3.25 percent since July 2007, but it has signalled it would raise rates if inflation accelerated.

Higher rates could help ease inflation, but could also hurt economic growth at a time when Thailand's economy is slowing due to the cost of imported oil and renewed political uncertainty.

"Managing inflation is a delicate job. As we are the agency looking after it, we will try to curb steep price spikes," Tarisa said. (Reporting by Boontiwa Wichakul; Writing by Vithoon Amorn; Editing by Darren Schuettler)

Construction workers work at a site as the sun sets in Chandigarh in this December 2006 file photo. REUTERS/Ajay Verma
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