Thailand: Central Bank raises interest rates and signals further tightening
March 9, 2011
At its latest monetary policy meeting held on 9 March, the Central Bank of Thailand (BoT) raised the one-day repurchase rate by 25 basis points to 2.50%, in a decision widely expected by the market. With the move, which marked the fifth increase in six meetings, the Bank has raised interest rates by 125 basis points since it began tightening the reins in July 2010. In its statement, BoT Assistant Governor Paiboon Kittisrikangwan claimed the hike as ?appropriate for anchoring inflationary expectations and for reducing the risks of financial imbalances in the economy.? In addition, monetary officials stated that global economic growth continues to gain momentum on the back of improving conditions in the United States and several European countries, together with booming Asian economies. Monetary officials also argued that, unless the political turmoil in the Middle East and North Africa becomes more widespread, the current spike in oil and commodity prices will remain a one-off effect. Finally, monetary authorities stated that the Thai economy continues to benefit from solid fundamentals, buttressed by strong export growth and domestic demand. Accordingly, authorities assessed that the current surge in oil and commodity prices would not weigh on growth prospects going forward. The next monetary policy meeting is scheduled for 20 April, with the majority of analysts expecting another rate hike.
Author: Ricardo Aceves, Senior Economist