What's fueling the Thai inflation spike?

Flood rebuilding spending in the billions is pushing up the prices of Thai goods and services, says OSK-DMG.

Because of this and a forecast of robust growth of 6% in 2012, the central bank will be weary of introducing rate adjustments that could tip the risks overboard and hurt the economy.

Here's more from OSK-DMG:

We continue to expect headline inflation to remain elevated in 2012 on the back of the massive government spending and rebuilding program. We also expect some pass-through from the minimum wage policy that could add to inflationary pressures. We maintain our full-year inflation at around 4.0% for 2012, slightly above the government’s forecast of 3.3-3.8%. Despite elevated inflation and healthy growth (we expect the economy to expand by 6.0% in 2012), we do not expect any changes to the policy rate as the central bank remains mindful of the need to balance the risks to growth and inflation. We expect the central bank to hold the policy rate at 3.00% at its 13 Jun policy meeting.

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