In the last few months, we have seen slight upward price movement with both headline and core inflation rates turning positive since the fourth quarter of last year. Currently, headline and core inflation for February 2010 are at 3.7 and 0.3 per cent respectively. The turnaround was due to a combination of the base effects from oil prices and the pick-up in domestic demand. Looking ahead, with the firming economic recovery, inflationary pressure is expected to increase further, with core inflation forecasted to surpass the midpoint of our target range of 0.5–3.0 percent by the end of the year. Thus, it is clear that in the near term, policymakers need to perform a delicate balancing act that would at the same time ensure a continued growth momentum, the anchoring of inflationary expectations, and the containment of potential financial imbalances. In light of the solid fourth-quarter GDP figures and January’s economic indicators, the current extraordinary accommodative monetary policy stance will be of less need for the Thai economy. Furthermore, an over-extended period of low interest rates can lead to heightened inflation expectations or financial imbalances such as asset price bubbles, as this crisis has vividly demonstrated in many countries. To this end, the timing of monetary policy normalization will be important so that it will not jeopardize economic recovery particularly as private investment has yet to pick up enough pace. Thus, I would like to assure you that, we will put our best effort in considering its timing carefully.
Before I go any further, I will give the standard Fed disclaimer that the views I express here are my own and do not necessarily reflect those of the Federal Open Market Committee (FOMC) or anyone else in the Federal Reserve System. Overheating Whenever I talk about monetary policy, I start with the Federal Reserve's dual mandate: price stability and maximum employment. With the unemployment rate back to very low pre-pandemic levels, and a variety of indicators showing the labor market is very strong, maximum employment has been achieved. But, with inflation rising to unacceptably high levels, we are far from our longer-run goal of 2 percent inflation. High inflation harms those who are most in need. Too many families are now struggling to meet the increasing cost of necessities. I am resolutely focused on restoring price stability, which is the foundation for a vibrant and healthy economy. Over the past year, inflation has increased rapidly and dramatically to levels last seen in the early 1980s. A year ago, overall inflation, as measured by the percent change in the personal consumption expenditures (PCE) price index, was 2.5 percent. In March, it was 6.6 percent. A portion of this sharp rise reflects global increases in food and energy prices. But, even excluding energy and food costs, the "core" inflation rate has increased from 2 percent a year ago to 5.2 percent today. 1/4  BIS - Central bankers' speeches  Three major imbalances are contributing to an overheating economy and high inflation.