Thailand: Central Bank raises interest rates in June
June 1, 2011
At its monetary policy meeting held on 1 June, the Central Bank of Thailand (BoT) raised the repurchase rate by 25 basis points to 3.00%, in a unanimous decision, which was in line with market expectations. With the move, the Bank has raised the policy rate by 175 basis points since monetary officials began withdrawing the policy stimulus in July 2010. The BoT argued that the economy continued to expand in the first quarter, supported by strong growth from the external sector. However, recent economic indicators suggest a moderation in the manufacturing sector, with output slowing in April. In particular, the automobile sector slumped, reflecting supply shortages in the wake of production shortfalls after the 11 March earthquake in Japan. Moreover, inflationary pressures continued to increase, fanned by higher prices for prepared food and the expectation that elevated oil and commodity prices would lead to higher production costs in the months to come. In addition, the BoT stated that growth in the global economy moderated somewhat in the first quarter, as the U.S. economy started to show signs that rising inflationary pressures had begun to weigh on consumption. The BoT also expressed concern that while growth in the Euro area appeared steady, sovereign debt woes remained a drag on the economy. In addition, monetary officials acknowledged that the Japanese economy slowed more than expected following the impact of the earthquake, but were upbeat about a faster than previously anticipated recovery. The next monetary policy meeting is scheduled for 13 July.
Author: Ricardo Aceves, Senior Economist