Thailand: Central Bank surprises with rate hike
December 1, 2010
At its 1 December monetary policy meeting, the Bank of Thailand (BoT) surprised the market by raising the one-day repurchase rate by 25 basis points from 1.75% to 2.00% and maintaining its dovish tone unaltered for the remainder of the year. The decision follows on two consecutive months without a change in the reference rate. BoT Assistant Governor Paiboon Kittisrikangwan stated that the recovery in the global economy continues as expected, but cited that additional downside risks persist, such as the increasing volatility in the financial markets, as a result of sovereign debt woes in some European countries. Moreover, monetary authorities claimed that the country's economic fundamentals remain robust, with economic growth buttressed by strong domestic demand. Consequently, as a result of increasing input costs due to growing domestic demand, inflationary pressures, while stable at the moment, are expected to rise in the coming months. The next monetary policy meeting is scheduled for 12 January.
Author: Ricardo Aceves, Senior Economist