Thai Consumer-Price Decline Stabilizes as Slump Eases

By Suttinee Yuvejwattana

Oct. 1 (Bloomberg) -- The decline in Thailand’s consumer prices stabilized in September, supporting the central bank’s decision to stop cutting interest rates as the country’s recession eased.

An index of consumer prices fell 1 percent from a year earlier, the Commerce Ministry said today. The decline matched the drop in August and the median estimate of 15 economists in a Bloomberg News survey.

The central bank kept its benchmark interest rate unchanged at 1.25 percent for a third straight meeting in August after four cuts from December to April. Thailand’s economic contraction probably eased last quarter and gross domestic product may expand in the final three months of 2009, the government predicts.

“Inflation may turn positive late this year, but it’s still not a concern,” said Pornthep Jubandhu, an economist at Siam Commercial Bank Pcl in Bangkok. “The central bank doesn’t need to worry about it until late next year.”

Bank of Thailand Governor Tarisa Watanagase said last week inflation isn’t a threat amid a “gradual” recovery from the recession, indicating she may not raise interest rates anytime soon. Policy makers “can’t be complacent” even as there were “more signs” the economy is improving, she said.

The $261 billion economy shrank 4.9 percent in the second quarter from a year earlier, less than a 7.1 percent contraction the previous three months. The Finance Ministry expects consumer prices to climb by 2 percent to 3 percent next year, after declining 0.8 percent in 2009.

Thailand’s core inflation index, which excludes fresh food and fuel, fell 0.1 percent last month from a year earlier, the Commerce Ministry said.

To contact the reporter on this story: Suttinee Yuvejwattana in Bangkok at Suttinee1@bloomberg.net