BOT may hike rate by 25-50 basis points

Last month's inflation peaked at 6.2 per cent, while accumulated inflation in the first four months grew 5.3 per cent year on year.

Raising the policy rate is one measure to control inflation, as it acts to slow down consumer spending. The Commerce Ministry expects an annual rate of 5-5.5 per cent this year.

Increased inflation may create concern for the Bank of Thailand (BOT) and force it to adjust its policy rate as the world is facing skyrocketing oil prices, which surged to US$135 (Bt4,320) per barrel last week, the source said.

However, lifting the policy rate may not be the most efficient tool for controlling the price index of consumer goods.

Saowanee Thairungroj, vice president in charge of the re-search division of the University of the Thai Chamber of Com-merce, said the BOT should keep the rate at 3.25 per cent as raising it would cause difficulty for the private sector.

"The country's economy has not recovered yet. The government should not immediately increase interest rates as that will create difficulty for private enterprises while world economic growth slows," she said. The BOT should try to stimulate investment by keeping the same policy rate.

But the  government may find it hard to control inflation as seven leading fertiliser manufacturers are seeking Commerce Ministry approval for price increases of up to 250 per cent for 104 fertiliser formulas.