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February inflation hits 7-month high

The Consumer Price Index (CPI) is likely to grow continuously in the following months because of the higher cost of raw materials and fresh foods amid rising concern over drought.

The Commerce Ministry reported yesterday that February inflation had edged up to the highest figure in seven months at 1.96 per cent year on year, mainly from rising food prices.

"The drought problem has created more concern over a rise in the prices of some foods, mainly fresh fruits and vegetables, rice and meat. Some goods prices may also increase as the weakening baht drives up the cost of some raw materials," said Srirat Rastapana, permanent secretary of the ministry.

Inflation in February was up slightly, by 0.23 per cent, from the January figure. Combined inflation in the first two months was up 1.95 per cent year on year.

Last month, among the 450 goods and service in the ministry's inflation basket, the prices of 199 items increased, while 75 items decreased in price and 176 were unchanged.

Prices in the food and beverage sector were up by 4.26 per cent on average compared with January's figure, while those outside that sector increased only slightly, by 0.77 per cent, amid a slight drop in fuel prices.

Despite the rising trend of the CPI, the ministry is confident that annualised inflation will be within this year's target of 2-2.8 per cent, in accordance with slowing economic growth, which is projected at 3-5 per cent.

Srirat said prices were expected to grow continuously in the remaining months, but should not be too high given the slowing economy, while the government had maintained its price-control policies.

The cap on the retail price of diesel fuel is due to expire next month, but she expects that the government will continue to subsidy the price. Otherwise, a higher pump price for diesel could increase inflation by 0.5-1 percentage point this year.

The Commerce Ministry also notes that an increase in the prices of tickets for Bangkok's MRT subway system, scheduled for July, will mark up inflation by 0.002 percentage point this year.

Core inflation, which excludes volatile food and fuel prices, firmed up slightly to 1.22 per cent year on year and 0.27 per cent month on month. Core inflation in the first two months was 1.13 per cent year on year, well within the Bank of Thailand's target range of 0.5-3 per cent.


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