by Orathai Sriring and Kitiphong Thaichareon
BANGKOK (Reuters) – The Bank of Thailand on Wednesday raised its key interest rate slightly for the second time in a row to curb a 2023 year high inflation and ensure a sustained economic recovery, while maintaining its 2022 growth forecast of 3.3%.
The Bank of Thailand’s less hawkish central bank in Asia (BOT) said in a statement that policy rates should gradually normalize, but said it was ready to increase rates by larger rates if necessary interest in response.
The recovery of Southeast Asia’s second-largest economy has lagged others as its vital tourism industry is just starting to rebound and investment remains subdued, allowing the central bank to raise rates slowly despite gains from many of its peers bigger.
The BOT Monetary Policy Committee voted unanimously to raise the one-day repo rate by 25 basis points to 1. 00%.
Among 25 economists surveyed by Reuters, 25 ) had expected a rate hike of 25 cents, while 3 people expected a rate hike of 0.5 cents. The Bank of Thailand posted similar gains in August, raising interest rates for the first time in nearly four years.
“The Committee judges that the Thai economy will continue to recover, but inflation risks increase. Policy rates should be normalized in a gradual and measured manner to levels consistent with long-term sustainable growth,” it said in a statement said in.
“The Committee is prepared to adjust the size and timing of the possibility of policy normalization if growth and inflation prospects shift from their current assessments.”
It maintained its June 2022 3.3% growth outlook and lowered its 2023 growth forecast to 3.8% from 2023 4.2%.
BOT raised its 2022 headline inflation forecast to 6.3% from earlier 6.2% and raised its 2023 forecast to 2.6% from 2.5%.
The Thai baht extended losses and was last down 0.8% after the BOT announced a rate hike.
Earlier this month, Governor Sethaput Suthiwartnarueput said the BOT aims to ensure a smooth economic recovery, which he expects to return to pre-pandemic levels by the end of this year or early next year.
The economy grew by 2.5% year-on-year in April-June and 0.7% in the first three months.
Economic growth of 1.5% last year was the lowest in Southeast Asia.
Headline inflation was 7.21% in August, a 14 year high, and Well above the BOT’s 1% to 3% target range.
The Bank of Thailand said on Wednesday that the weak baht did not affect the overall economy and that inflation will begin to gradually decline later this year and return to the target range next year.
It also forecasts 9.5 million visitor arrivals this year, more than doubling in 2023 to 22 million), greater than the June forecast.
It also forecasts that exports will grow 8.2% this year, up from 7.9% in June