On Wednesday, the Bank of Thailand (BoT) announced a further increase to its key interest rate for the second time in a row, expecting to rein in 14-year high inflation and boost the country’s economic recovery.
At the last meeting, the BoT’s Monetary Policy Committee (MPC) voted unanimously that the one-day repurchase rate would increase by 25 basis points to 1.00%.
Earlier, Reuters polled 25 economists about a potential increase in the BoT’s benchmark repurchase rate. Results showed that 90% of analysts thought the central bank would opt for a 25-basis-points increase to 1.00%.
A total of 23 experts predicted the move, while three others expected a 50 basis-point hike.
In a Bloomberg survey of 17 economists, 13 expected the MPC to raise the rate by 0.25%, while the other four believed the increase would be 0.50%.
The move came as Thailand, Southeast Asia’s second-largest economy, appeared to be lagging behind other countries that have announced much bigger increases.
However, the central bank has slowly raised rates as the kingdom’s vital tourism sector has barely started to recover and investment remains sluggish.
After Wednesday’s meeting, the BoT released a statement, saying: “Thai economic recovery has continued to gain traction, driven mainly by tourism and private consumption.”
“The overall growth and inflation outlook are consistent with the previous assessment,” it added.
The hike is the second straight repurchase rate increase in a row. It was anticipated after the US Federal Reserve announced a 75 basis points hike last week, sending the dollar index to a new two-decade high and putting further pressure on other currencies, including the Thai baht.
Moreover, the BoT said the monetary policy should be normalized in a gradual and measured manner, adding that the MPC believed that the Thai economy would continue to recover but with higher inflation risks.
Meanwhile, the central bank raised its forecast for headline inflation this year to 6.3% from 6.2% set earlier. However, it maintains its economic growth outlook for 2022, which was set in June.
The BoT also raised the headline inflation forecast to 2.6% in 2023 from 2.5% and cut the growth forecast for 2023 to 3.8% from 4.2%.
