Rate hike possible: central bank

However, BOT Governor Tarisa Watanagase yesterday said she was optimistic there was only a minimal chance of the country's inflation rate reaching double-digit figures in the months ahead.

She said it was the mandate of the Monetary Policy Committee (MPC) to keep inflation at an acceptable level. If it is too high or the risk of inflation is higher than appropriate, the central bank will tackle it using monetary policy.

An increase in the key interest rate will slow down consumption and cool inflationary expectations. Many central banks have already raised their policy interest rates, to reduce inflationary pressure, she said.

"I do not mean the MPC will raise the policy interest rate at its next meeting. Its members will make a decision based on the latest data," Tarisa said.

She said that just as fiscal policy boosted economic growth, monetary policy would play its part by helping facilitate the efficiency of fiscal policy without worsening price stability.

Earlier, National Economic and Social Development Board secretary-general Ampon Kittiampon said the central bank could not raise its policy rate to tackle cost-push inflation, because a higher rate would increase consumers' costs of living.

However, the BOT governor said she believed raising the interest rate would not have much adverse effect on the cost of living or the economy, because Thailand's real interest rate was currently the lowest in the region.