Thursday, January 6, 2011

Inflation Eases in Thailand

By Phisanu Phromchanya

Thailand’s October inflation eased to 2.8% on-year vs 3% in September, but recent floods are likely to result in a modest upswing in food prices — especially cereals — in the coming months, says Barclays Capital.

Non-food prices are still being contained, thanks partly to subsidies for utilities and transportation, while the Thai bhat’s rise helped stem energy price pressures.

“We believe (the) probability of a rate hike at theDec. 1 policy meeting has declined significantly. Indeed, the BOT is likely to pay close attention to global events, starting with the G-20 meeting in Seoul and this week’s Fed monetary policy meeting.”

The BOT expects inflation to rise only in 2011 and does not view it as an “immediate threat.” It expects export growth to moderate in coming months due partly to a firmer bhat.

“We believe the central bank is likely to take a gradual approach to policy normalization. That said, interest rates remain on a clear uptrend in Thailand over the medium term,” Barclays says.

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