Market News

BY Suttinee Yuvejwattana, Bloomberg News

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(Bloomberg) -- Thailand’s central bank raised its benchmark interest rate for a fifth straight time, as policymakers prioritized inflation control amid a steady economic recovery.

The Bank of Thailand’s monetary policy committee voted unanimously to raise the one-day repurchase rate by 25 basis points to 1.75% on Wednesday, as seen by 19 of 22 economists in a Bloomberg survey, with the remaining three predicting no change. 

“The committee deems a continuation of gradual policy normalization to be appropriate in light of the growth and inflation outlook,” the BOT said in a statement.

Baht is trading little changed at 34.30 against the dollar, as the Thai currency showed a muted reaction to the rate move.

A rebound in tourism in Southeast Asia’s second-largest economy is boosting activity and demand in the economy, whose recovery the BOT said is on track. At the same time, campaign spending for a general election due in May is expected to fan price pressures, when headline inflation is still above the central bank’s 1%-3% target range.

The central bank forecast gross domestic product to grow 3.6% this year and 3.8% in the next. It sees foreign tourist arrivals to touch 28 million this year, and climb to 35 million next year. 

At the same time, it expects headline inflation to return to target in mid-2023, while the core measure — that strips out volatile food and fuel prices — will likely come in at 2.4% from 2.5% seen previously, and ease to 2% next year. 

Still, the BOT sees upside risks from higher cost pass-through and demand pressures. Persistently high inflation and banking stresses in some advanced economies as risks to the global economic outlook, according to the central bank.

Wednesday’s hike marks the continuing divergence of policy path of central banks in Southeast Asia, with Thailand and the Philippines still staying their tightening course, while Indonesia and Malaysia have opted for a pause. Vietnam on the other hand has already pivoted to a rate reduction.

--With assistance from Tomoko Sato, Anuchit Nguyen, Patpicha Tanakasempipat, Cecilia Yap, Ditas Lopez, Marcus Wong and Pathom Sangwongwanich.

(Updates with details throughout)