Watch rate rise or consumers, private sector will be hit, Thanong tells BOT

The central bank last month raised its benchmark interest rate for the first time in two years, hiking it 0.25 basis points to 3.5 per cent in an effort to curb inflation.

It said the rise would ensure inflation remains under control.

Thanong said the bank must be careful. Higher interest rates will increase production costs in the private sector and this will affect consumers. "Interest rate increases cannot curb inflation. As far as I'm concerned, a 25-basis point increase is acceptable, but it would be better if it did not hike the rate," he said.

He forecast headline inflation to decline to 7-8 per cent in the second half of the year, from 9.2 per cent in July. "I'm not worried about inflation in the second half because core inflation is still at 3 per cent, which means that inflation is not serious," he said.

Thanong said while the Finance Ministry and the bank had different economic theories, the agencies could work together.

Despite a decline in global crude-oil prices, they will not fall below US$100 (Bt3,368) a barrel, he said.