UPDATE 1-Thai inflation dips for second straight month, c.bank seen on hold

(Adds detail, comments)

* Feb headline CPI +3.23 pct y/y vs +3.40 pct in Reuters poll

* Feb core CPI +1.57 pct y/y vs +1.70 pct in poll

* Most economists still see policy rate on hold in near term

By Kitiphong Thaichareon and Orathai Sriring

BANGKOK, March 1 (Reuters) - Thailand's headline inflation in February eased, dipping for the second month in a row, as government subsidies held down prices and a strong baht made imports cheaper, giving the central bank room to keep monetary policy accommodative to support the export-driven economy amid slow global demand.

Most economists expect the Bank of Thailand's (BOT) policy committee to leave its policy rate unchanged at 2.75 percent for the rest of the year, but some think tightening is possible later in the year if inflation picks up again.

Annual inflation in February eased for the second month in a row to 3.23 percent, below a median forecast of 3.4 percent in a Reuters poll and January's 3.39 percent. Inflation was at a more than one-year high in December at 3.63 percent.

Core inflation -- which strips out prices of fresh food and energy -- was little changed at 1.57 percent in February after 1.59 percent in January. That is inside the BOT's core inflation target range of 0.5-3.0 percent, which guides monetary policy.

Economist Usara Wilaipich at Standard Chartered said still-benign inflation, especially regarding core inflation, "should allow the BOT to keep its accommodative monetary policy stance for the rest of this year."

"Inflation in February was suitable for the economy and quite stable following government measures to manage the price of goods and energy," Vatcharee Vimuktayon, the Commerce Ministry's permanent secretary, told a news conference.

The ministry has still forecast headline inflation of 3.3 percent in the first quarter and 2.8-3.4 percent for the whole of 2013. In 2012, it was 3.02 percent.

Inflation has been held down by government price controls and subsidies for some fuel and utilities plus free public transport to bring down living costs.

The baht, emerging Asia's strongest currency this year with a 2.9 percent rise against the dollar, has also helped contain imported price pressures.

Food and drink prices in February rose 4.06 percent from a year earlier, down from January's 4.3 percent increase.


Inflation elsewhere has also been manageable, so central banks across Asia are likely to continue supporting economic growth.

Indonesia, Southeast Asia's biggest economy, saw annual its inflation rate accelerating to 5.31 percent in February from January's 4.57 percent because of restrictions on crop imports.

But that was within Bank Indonesia's inflation target, giving the central bank room to keep its benchmark interest rate on hold at its March meeting.

Although inflation in Thailand remains curbed, some analysts are worried about price pressure as the economy continued to grow and following a nationwide daily minimum wage of 300 baht ($10) from January, a 26 percent rise on average, on top of a jump of 40 percent in April 2012.

The new wage hike is expected to increase operators' overall costs by 6.4 percent, according to the National Economic and Social Development Board, which compiles GDP data.

"We don't see an inflation risk at the moment but we expect rising food inflation in the second half. We also expect a 50 basis-point rate hike in the latter half on the back of rising inflation and normalisation process," said economist Kampon Adireksombat of Tisco Securities.

The central bank has forecast headline inflation of 2.8 percent for 2013 and core inflation of 1.7 percent. Economists predict headline inflation of as high as 5 percent this year.

However, the BOT's monetary policy committee noted a slight increase in inflationary pressure and risks related to high credit growth on Feb. 20, when it left the main rate unchanged for a third straight meeting, resisting government calls for a rate cut to stem "hot money" inflows. ID:nL4N0BJ1QG].

In January, private credit growth stayed at 15 percent from a year earlier while credit to the household sector was 16.6 percent, central bank data showed. (Additional reporting by Amy Sawitta Lefevre and Viparat Jantraprap; Editing by Jacqueline Wong)