Thailand’s central bank raised its key interest rate on Wednesday for the first time since December 2018 to fight surging inflation.
The Bank of Thailand (BOT) opted for a 25 basis points rise, as tipped by analysts. Its monetary policy committee voted 6-1 to increase the one-day repurchase rate to 0.75% from a record low of 0.50%, which had been unchanged since May 2020.
One member voted to raise the policy rate by 0.50 percentage points. Seventeen of 20 economists surveyed had expected a quarter-point hike, with the remaining predicting a half-point rise.
Tourists Helping to Revive Economy
The Southeast Asian country had maintained its policy focus on supporting the economic recovery, which has lagged that of its Asian neighbours due mainly to tourism curbs imposed by the Prayut Chan-ocha government during the Covid-19 pandemic.
The vital tourism sector has only recently begun to recover this year as visitor entry restrictions were eased.
“The economic recovery (has) continued with momentum from higher-than-expected foreign tourism,” Piti Disyatat, secretary of the MPC said in a statement.
“The Thai economy is expected to return to the pre-Covid level by the end of this year and will continue to gain traction.”
The BOT had signalled gradual policy tightening to cool price pressures. Driven largely by high energy prices, the consumer price index (CPI) rose 7.6% in July from a year earlier, far above its target range of 1-3%.
Thailand‘s commercial banks should not rush to raise their interest rates even though the central bank will tighten monetary policy, the finance minister said earlier on Wednesday.