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Thailand’s inflation reaches 3%

The Thai baht will continue to rise as more foreign capital flows in to the domestic financial market, but the stronger currency is a double-edged sword because it could slow what has been a strong export business.

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Rise in the inflation rate

Thailand’s inflation last month rose 108.92 points, or 3% year-on-year, commerce permanent secretary Yanyong Phuangrach said on Tuesday.

Mr Yanyong said December inflation rose 0.16 per cent from November . The annual average inflation for 2010 stood at 3.3 per cent.The increase was in line with the ministry’s forecast at 3.0 to 3.5 per cent, he said. Inflation should be between 3.2 and 3.7 per cent in 2011, he said.

The Commerce Ministry forecast December inflation to stand at 3.2-3.4 per cent on average.

Due to sharp increases in food and energy prices, annual inflation accelerated to 3% in December from 2.8% in the previous month. The commerce ministry forecasts inflation to stay between 3% and 3.5% this year. Month-on-month, consumer prices climbed 0.16%.

The Bank of Thailand had resumed monetary policy tightening in December in anticipation of a rise in inflationary pressures. The policy interest rate was raised by 25 basis points to 2% per annum. The central bank expects inflationary pressures to rise with increasing demand on the back of economic expansion.

The Thai baht will continue to rise as more foreign capital flows in to the domestic financial market, but stronger currency could slow what has been a strong export business.

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