* S.Korea, Indonesia annual inflation hit 9-yr lows in July
* Thai consumer prices fall record 4.4 pct
* Korea, Thai rates likely on hold; Indonesia seen lower
By Adriana Niina Kusuma and Cheon Jong-woo
JAKARTA/SEOUL, Aug 3 (Reuters) - Inflation in South Korea and Indonesia cooled further in July while prices in Thailand fell at a record pace, but analysts remained convinced that policy rates are at or near their bottom given growing signs of an economic recovery.
After rapidly slashing rates following the outbreak of the global financial crisis, most central banks around the region have signalled that they were done with rate cuts and that borrowing costs were likely to remain on hold for the time being.
The only exception is Indonesia, where Bank Indonesia (BI) is expected to lower rates by a quarter point to a record low of 6.5 percent at the next policy review on Wednesday after data showed inflation slowed to its lowest level in nine years.
"There will likely be another 25 basis points cut and this has been expected by the market," said Wiling Bolung, head of markets at ANZ Panin.
"BI rate by year-end may be lowered from 6.75 percent by 25-50 basis points, depending on inflation."
Consumer price growth in Southeast Asia's biggest economy eased to 2.71 percent last month, a touch higher than expected but still sharply below 3.65 percent in June. [ID:nJAK482064]
Bank Indonesia Deputy Governor Budi Mulya said last month there was room to cut rates further after slashing them by a total of 2.75 percentage points since December.
RATES AT BOTTOM
Other central banks in the region have signalled that rates were unlikely to fall further.
Last week the Reserve Bank of India kept its policy unchanged and raised its wholesale inflation forecast in a sign of tightening measures to come, while Malaysia hold held rates steady, saying the economy would soon turn the corner. [ID:nBOM398293] [ID:nKLR482787]
South Korea's consumer price inflation eased to a nine-year low of 1.6 percent in July, but bond futures there fell as traders expected price pressures to gradually pick up, prompting tightening measures by the central bank.
"Prices will likely remain stable through the third quarter, but may head higher from the fourth quarter." said Chang Hwa-tak, economist at Dongbu Securities.
"Higher raw material prices and likely price increases in public services and by manufacturers may add to inflationary pressure in the fourth quarter."
Bond investors shrugged off the inflation figure, which
came as expected, and instead focused on data showing housing
prices rising at their fastest pace since July last year.
[ID:nSEO170998]. September treasury bond futures
"Consumer prices alone won't be enough for the Bank of Korea to raise interest rates, but there are concerns about asset price gains as well as accelerating inflation next year." said Chang.
"It is likely that the central bank would give some tightening signals in the fourth quarter before it actually raises interest rates early next year."
In Thailand, prices plunged 4.4 percent from a year earlier, more than expected, but analysts see price pressures returning quickly as high energy and food prices a year ago start to fall out of the calculation.
"The policy outlook remains unchanged based on the numbers as we continue to see very little threat from demand-led deflation going into the year-end," said Carl Rajoo, economist at Forecast in Singapore.
The Bank of Thailand, which cut rates four times since December, kept rates unchanged at 1.25 percent for the second time in a row last month and analysts expect it to remain there for the rest of the year. (Writing by Kazunori Takada; Editing by Tomasz Janowski)