Thai inflation figures in March 2011 moved in line with expectations. Headline Inflation rose to 3.14 percent YoY, while Core Inflation increased to 1.62 percent YoY. In addition, consumer goods prices have shown continuous surges over the last six consecutive months. KASIKORN RESEARCH CENTER (KResearch) therefore views that inflation figures in 2Q11 may accelerate further. Headline Inflation may approach 3.5 percent and Core Inflation will likely rise to 2.0 percent YoY due to many factors, particularly gradual increases in product prices consistent with higher production costs, as well as increasing oil and food prices. Given expectation on rising inflationary pressures from 2Q11 through 2H11, KResearch views that inflation overall in 2011 will likely be 3.6-4.6 percent (with a mid-point of 4.0 percent from our base case scenario), whereas Core Inflation may attain 2.4-3.0 percent (with a mid-point rate of 2.6 percent seen in our base case scenario).
Based on the latest inflation figures and upward trend that will likely continue (particularly for Core Inflation that may surge to 3.0 percent in 4Q11, or at the end of 3Q11) amid rising product prices, KResearch views that the BOT policy rate will be adjusted higher by 0.25 percent to 2.75 percent at the meeting on April 20, 2011, and may surge to 3.25 percent by the end of 2011 to maintain domestic price stability, thus increasing money market and bank interest rates for a while.
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