by BLOOMBERG / pic by AFP

THAILAND’S central bank said inflation this year will breach its target on higher oil and food prices, even as it held its policy rate steady to continue to focus on supporting an economy still reeling from the pandemic.

The Bank of Thailand on Wednesday raised its headline inflation forecast for this year to 4.9%, above the top-end of its 1%-3% range and boosting it from the 1.7% it predicted in December.

As well, the central bank’s rate-setting committee decided unanimously Wednesday to hold its key rate at a record low 0.5% for a 15th straight meeting, as forecast by all 23 economists in a Bloomberg survey.

“While the Bank of Thailand tries to delay rate hikes, the balance may gradually shift to upside risk to inflation while the economy continues to recover,” said Frances Cheung, rates strategist at Oversea-Chinese Banking Corp in Singapore.

Assistant Governor Piti Disyatat said in a statement that inflation may be faster than 5% in the second and third quarters before easing back to within its target next year as supply pressures ease and demand pull stays relatively low. Inflation expectations remain within the bank’s target over the medium term, he added.

The Bank of Thailand on Wednesday also lowered its gross domestic output forecast for this year to 3.2%, from 3.4%, and for next year to 4.4%, from 4.7%.

Thailand, a net energy importer, is facing rising costs as oil prices surged following Russia’s invasion of Ukraine. Although inflation already accelerated to the fastest pace in 13 years last month, monetary policymakers have focused on supporting the economic recovery from the pandemic, while signaling fiscal authorities are better placed to ease inflation issues.

Finance Minister Arkhom Termpittayapaisith last week said monetary and fiscal policies must be synchronized to sustain the recovery. The government also announced measures worth 80.2 billion baht ($2.4 billion), mainly to subsidize energy prices.