Thai inflation reaches 10-year high

BANGKOK: Thailand's inflation rate jumped to a 10-year high of 7.6 percent in May as soaring fuel prices pushed up costs in food and other sectors, the commerce ministry said on Monday.

In Thailand's food and beverage sector, prices jumped 11.8 percent year-on-year, with rice, flour, meat, eggs and dairy goods all affected. Fuel prices in Thailand surged 31.2 percent.

"This May the inflation rate hit a 10-year record, the highest since 1998," an official at the commerce ministry told AFP. "The high inflation was driven by high oil and rice prices."

For the first five months of 2008, the inflation rate stood at 5.8 percent, mainly due to oil reaching record global highs, the ministry said. Inflation in April was 6.2 percent.

World rice prices have soared this year, a trend blamed on higher energy and fertiliser costs, greater global demand, droughts, the loss of rice farmland to biofuel plantations and price speculation.

Thailand is the world's biggest exporter of the grain, and unlike other top producers has not put any curbs on exports to ensure domestic supply.

Thailand's finance minister announced in late April that they were raising the inflation target for 2008 to 5.0-5.5 percent from 3.0-3.5 percent due to soaring oil prices.

The central bank has kept Thailand's interest rate steady at 3.25 percent since August last year, but the spike in inflation could lead to a fresh rise, analysts said.

"Higher-than-expected inflation increases the likelihood that the central bank will raise its policy interest rate at its next meeting on July 16," SCB Securities senior economist Pornthep Jubandhu told Dow Jones Newswire.

Fresh anti-government protests in Bangkok have also recently battered investor confidence, prompting the finance minister last week to deny rumours of another possible coup in the kingdom.