Thailand: Central Bank raises interest rates in July and signals further hikes
July 13, 2011
At its 13 July monetary policy meeting, the Central Bank of Thailand (BoT) raised the repurchase rate by 25 basis points to 3.25%, in a decision widely expected by market analysts. With this move, the Bank has raised the policy rate by 200 basis points since monetary authorities began withdrawing the policy stimulus in July 2010. In its statement, the BoT argued that the economy continued to expand in the second quarter amid a healthy external sector and strong growth in domestic demand. The Bank underscored that the supply chain disruption, in particular in the automobile industry ?was resolved sooner than expected?, which bodes well for manufacturing production going forward. In addition, consumption and investment will continue to be supported by favourable credit and employment conditions. The Bank sees inflationary pressures to persist as a result of elevated energy and food prices. Moreover, the Bank considers that the government's extension of cost-of-living alleviation measures is unlikely to offset price pressures caused by minimum wage hike. As a result, monetary officials argued that ?in light of the continued risks to inflation amid robust domestic demand, the Committee deemed to continue increasing the policy rate.? The next monetary policy meeting is scheduled for 24 August.
Author: Ricardo Aceves, Senior Economist