Thai Central Bank Hikes Key Rate As Economy Recovers

On Wednesday, the central bank in Thailand hiked its interest rate for the fourth meeting in a row by 25 basis points in order to bring down high inflation.

This hike came in spite of the economic growth prospects of the country improving due to the return of Chinese tourists.

The hike

As the headline inflation last year rose to a high of 24 years, the monetary policy committee (MPC) of the Bank of Thailand unanimously voted at its first review this year to hike the one-day repurchase rate.

As widely expected, a hike of a quarter point was delivered, which saw the rate go up to 1.50%. The central bank said that the country’s economy would continue growing.

It also added that there should be a decline in headline inflation and it should come back down between the range of 1% and 3%.

It did add that any additional hikes in the interest rate would be measured and gradual, but also said that it was ready to make any adjustments if required.

The BOT said that the committee believes a policy of continuing gradual normalization is the right path for their monetary policy, which is consistent with the inflation and growth outlook.

Economic recovery

The central bank said that because of the economic recovery in Thailand, they were expecting the risks to rise in terms of inflationary pressures due to demand.

In a news conference, Piti Disyatat, the Assistant Governor, said that there could be an increase in interest rates for a time because economic recovery had already begun.

After the hike was delivered on Wednesday, the total increase in the interest rate was by almost 100 basis points. The bank started its tightening cycle in August last year.

However, it should be noted that the cycle has been a lot less aggressive than that of its regional peers as the economic recovery of Thailand has been lagging as opposed to other Southeast Asian nations.


According to some analysts, the tightening cycle may soon reach a pause. They said that since core inflation was expected to remain elevated, the focus of central banks is more on inflation than growth.

Therefore, they believe that another interest rate hike of 25 basis points would be delivered in this ongoing tightening cycle, which will push the rate up to 1.75%.

However, they would then hit pause. This year is expected to see a slowdown in exports, which would offset some of the tourism gains.

But, they are also expected to rise in 2024 because there will be some improvements in a number of economies, including China.

The BOT had forecast in November that there would be a growth of 3.7% this year in the economy of the second-largest economy in Asia, after last year’s growth had been around 3.2%.

It also predicted that inflation would come down to 3%. Official data of gross domestic product (GDP) for 2022 is due in the next month.

On Wednesday, the tourism forecast was also raised by the BOT.

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