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Now some clarity is in place after the MPC's announcement of a benchmark interest-rate increase by 25 basis points to 3.5 per cent last week. What brought the committee to take such action?

The inflation rate hit a 10-year high at 8.9 per cent in June while core inflation stood at 3.6 per cent, exceeding the Bank of Thailand's comfort zone ranging from zero to 3.5 per cent. Nonetheless, as the crude oil price slipped down from a record high at US$147 (Bt4,912) per barrel to below $130 per barrel last week, its future direction is beyond prediction. It could be just a small correction before reverting back to set a new high or fall further to a new support level.

The MPC has no choice but to cool down anticipation of inflation. Earlier, analysts expected the committee to increase the interest rate by at least 100 basis points by year-end, but the situation has slightly changed. The MPC cannot overlook the impact of political uncertainty, a slowing global economy and deteriorating domestic consumption, which still outweighs market sentiment.

Moreover, at the moment the MPC embarked on its brave action, the government launched a $1.4-billion package to ease financial pressure from soaring fuel and living expenses, including free bus and train rides for Bangkok residents. Most of the package - about 70 per cent - is aimed at reducing oil taxes, which the market expects will ultimately reduce the pricing pressure. Consequently, the necessity of an aggressive interest-rate climb is alleviated. We might see just another hike by only 25 basis points to 3.75 per cent by year-end.

However, upcoming data always play a big role in policy-makers' decisions. The situation is subject to change from time to time and the truth will always be unveiled when it has already happened.