Inflation likely to spike at 9% in May

"May's inflation rate will be announced soon, and another spike is expected," the report said. "The market is talking about headline inflation reaching 9 per cent, from 6.2 per cent in April and 5.3 per cent for January-April 2008."

However, other economists believe although the rate continues to climb, inflation will not have reached as high as 9 per cent.

Phatra Securities senior economist Thanomsri Fongarunrung said this month's inflation should have hit 6.6 per cent, driven largely by rising oil prices. Core inflation is expected to have reached 2.6 per cent in May, compared with 2.1 per cent in April.

It is the responsibility of the Bank of Thailand to manage inflation by allowing core inflation to move between zero and 3.5 per cent. Core inflation does not include food and energy.

However, Thanomsri said food prices had slowed down the pace of their upward movements, while oil prices had adjusted only slightly upwards.

"If the oil price stabilises, we'll see inflation hovering around 6 per cent over the next two or three months," she said.

But if food prices continue to rise, headline inflation will approach 7 per cent over the next two months, adding to the pressure.

Standard Chartered senior economist Usara Wilaipich said there was a risk that inflation had spiked to 7 per cent this month as global oil prices reached US$133 (Bt4,300) a barrel. Domestic oil prices have been frequently adjusted, while the baht has become weaker.

Core inflation is likely to range from 2.5-2.7 per cent this month, Usara said.

Oil prices above $130 a barrel have resurrected the issue of Thailand's rate of oil imports to gross domestic product being one of the highest in the world. Economists  warn higher oil prices could wipe out the country's trade surplus.

As well as forecasting 9-per-cent headline inflation, UOB Kay Hian predictsin the short term, the Stock Exchange of Thailand's Index will likely fall to the 780-800-point level.