Thailand: Bank of Thailand lifts interest rates
August 24, 2011
At its 24 August monetary policy meeting, the Central Bank of Thailand (BoT) hiked the one-day repurchase rate by 25 basis points to 3.50%, in a decision widely awaited by private sector analysts. The decision represented the ninth increase since July 2010, when the Bank started to push up the key monetary policy rate from a record low of 1.25%. In their statement, monetary authorities argued that despite the slowdown in economic activity in the advanced economies, in particular in the United States and core Europe, the economy continues to benefit from strong intra-regional trade and resilient domestic demand, which is supported by favourable conditions in the labour market. In addition, the Bank stated that despite the moderation in global energy and food prices, inflationary pressures persist, as domestic demand is expanding as a result of fiscal measures taken by the government of former Prime Minister Abhisit Vejjajiva. As a consequence, inflation expectations remain high. The next monetary policy meeting is scheduled for 19 October. Going forward, inflation pressures are likely to mount, as the recently-elected government has proposed to raise the minimum wage and boost civil servant salaries. In addition, the government plans to hike rice prices for the next harvest in November which, if implemented, is likely to propel food price inflation in the country and in the region.
Author: Ricardo Aceves, Senior Economist