Thailand’s central bank raised its interest rate by a quarter point as inflation is set to remain high on domestic energy prices.
The Monetary Policy Committee of the Bank of Thailand unanimously decided to raise the policy rate by 0.25 percentage point to 1.25 percent, with immediate effect.
This was the third rate hike this year after a 25 basis point increase each in September and August.
Headline inflation is forecast to be at 6.3 percent this year, unchanged from prior projection. However, the bank has upgraded its inflation forecast for 2023 to 3.0 percent citing the upward adjustment of electricity charges.
Inflation is forecast to return to the target range by the end of 2023 and it is seen at 2.1 percent in 2024.
The bank said the trajectory of Thai economic growth remained largely unchanged in 2023 and 2024 as the strength of the tourism sector and private consumption will lessen the impact of the global slowdown on exports.
The domestic economy is projected to expand 3.2 percent in 2022, 3.7 percent in 2023, and 3.9 percent in 2024. The outlook for this year was trimmed from 3.3 percent and that for next year from 3.8 percent.
In the third quarter, Southeast Asia’s second largest economy grew 4.5 percent, marking the fastest pace in more than a year on the back of strong private consumption and investment.
The recent strong performance of the economy should give the central bank the confidence to press ahead with its tightening cycle, Gareth Leather, Capital Economics’ economist said.
Although higher interest rates and weaker global demand will act as a drag on the outlook over the coming quarters, the continued rebound in the tourism sector should ensure the recovery remains on track, the economist noted.