The Bank of Thailand raised its key interest rate by 25 basis points for a fourth consecutive meeting on Wednesday, as it attempts to curb high inflation even as the return of Chinese tourists brightens the country’s economic growth prospects.
The central bank’s Monetary Policy Committee voted unanimously to raise the one-day repurchase rate to 1.50% at its first review of the year.
Of the 23 economists polled by Reuters, 21 expected the key rate to rise by a quarter point while the remaining two forecast no change.
The central bank said in a statement that the economy is projected to continue growing while headline inflation should decline.
Any further rate increases would be gradual and measured, but it stood ready to adjust them as needed, it said.
“The committee deems that a continuing gradual policy normalisation is an appropriate course for monetary policy consistent with the growth and inflation outlook,” the statement said.
Exports were expected to slow this year before picking up in 2024 alongside a global recovery, it added.
With Wednesday’s move, the central bank has raised the benchmark rate by a total of 100 basis points (bps) since August.
The tightening cycle has been less aggressive than many of its regional peers, however, as Thailand’s economic recovery has lagged that of other Southeast Asian countries. The vital tourism sector only started to rebound late last year.
The BoT previously said the key rate would continue to rise for a while to help the economy grow fully and to allow inflation to return to its target, which is expected in the second half of 2023.
Average headline inflation hit a 24-year high of 6.1% last year, far above the central bank’s target range of 1% to 3%. In November, it predicted inflation would drop to 3% in 2023.
That same month, the BoT forecast the economy would grow 3.7% this year, after estimated growth of 3.2% last year. Official 2022 gross domestic product (GDP) data is due next month.
The BoT predicted 22 million foreign tourist arrivals this year and 31.5 million in 2024. There were 11.5 million foreign visitors last year, compared with a record of nearly 40 million in pre-pandemic 2019.
China’s reopening is expected to further boost tourism, with the government predicting at least 5 million Chinese visitors this year, about half of the 2019 figure.
The baht stood largely unchanged at 32.77 to the dollar, near a 10-month high, after the announcement.
Weakening exports, which make up more than half of Thailand’s output, are the dark clouds that loom in the horizon. A stronger baht could further worsen the outlook. Overseas shipments fell 14.6% in December, more than expected, for a third straight month of contraction.