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Published on December 5, 2007

As well, the central bank said yesterday it had no target in mind for the US-dollar/baht exchange rate and that the managed floating exchange rate regime would continue rather than shifting to some other regime. It said it had kept the baht in line with regional currencies to facilitate exports and imports.

Assistant Governor Duang-manee Vongpradhip said the economy continued to be beleaguered by risk factors from the global economic slowdown.

Private consumption and investment have shown continuing improvement on top of higher-than-expected export growth, but the US sub-prime mortgage crisis remains a risk factor to be closely monitored, she said.

Inflation has been under rising pressure from hikes in oil and commodity prices, which are likely to affect the prices of goods and services in the future.

The BOT's Monetary Policy Committee revised upwards its projection of crude-oil prices in the Dubai market to US$82 (Bt2,800), from $68 a barrel during this quarter. The price is expected to stay at $78 a barrel over the next seven quarters.

However, in a worst-case scenario, the crude-oil price is projected to rise to $87 a barrel, compared with $80 in previous fourth-quarter estimates, before climbing incessantly to peak at $99 in the first quarter of 2009.

"However, core inflation will possibly be under the target over the next eight quarters," Duangmanee said.

She declined to disclose anything further about the BOT's monetary-policy stance.

There is widespread belief in the market that the policy interest rate has already reached a neutral stance. Most observers believe the one-day repurchase rate will be raised in the second half of next year when the BOT acts to slow down inflation.

Seamico Securities yesterday said in a report that the policy interest rate had reached a bottom point of 3.25 per cent, because risks to economic growth had declined, while risks of inflation had increased. It said crude-oil production by Organisation of Petroleum Exporting countries was expected to be maintained after oil prices had diminished continuously.

Headline inflation grew 3 per cent last month, the highest rate in 10 months, due mainly to a 23.3 per cent hike in oil prices. The Commerce Ministry believes the headline inflation rate will not exceed 2.5 per cent for the full year.

However, the ministry says headline inflation will be 3-3.5 per cent if the oil price in Dubai averages $85 a barrel. It will be 3.5-4 per cent if the oil price rises to between $85-$90 a barrel.

Duangmanee said adjustments to the price of cooking gas would have only a slight effect on inflation. Each of the planned adjustments will fuel inflation 0.02 per cent.

The BOT believes there will be staged increases in the price of cooking gas next June, August, October and December.

Duangmanee said the BOT had taken into account an expected reduction in the US federal-fund rate next Tuesday.

Anoma Srisukkasem

 The Nation