Thailand’s central bank raised its key interest rate for the second time this year as inflation continued to remain well above the target.
The Monetary Policy Committee of Bank of Thailand unanimously decided to lift the policy rate by a quarter-point to 1.00 percent from 0.75 percent.
This was the second rate hike this year after a 25 basis point increase in August, which was the first such action since December 2018.
The bank expects the economy to grow 3.3 percent this year and 3.8 percent next year, driven mainly by tourism and private consumption.
At the same time, headline inflation is expected to be at 6.3 percent in 2022 before declining to 2.6 percent in 2023 due to falling global oil prices and gradual easing of supply chain bottlenecks.
Consumer price inflation rose to 7.9 percent in August, which was the highest since 2008. This was well above the target range of 1-3 percent.
The committee judged that the Thai economy will continue to recover but with increased inflation risks.
The MPC said it is ready to adjust the size and timing of policy normalization should the growth and inflation outlook shift from the current assessment.
With inflation elevated and the currency coming under further downward pressure, the central bank will need to accelerate the pace of tightening, Gareth Leather, an economist at Capital Economics said.
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