BoT raises key rate a quarter-point

BoT raises key rate a quarter-point

Increase to 1.75% widely expected as central bank seeks to keep lid on inflation

Shoppers buy food items in the Yaowarat neighbourhood of Bangkok. Consumer price inflation in February eased to 3.8% annually, from 5% in January. (Photo: Apichart Jinakul)
Shoppers buy food items in the Yaowarat neighbourhood of Bangkok. Consumer price inflation in February eased to 3.8% annually, from 5% in January. (Photo: Apichart Jinakul)

The Bank of Thailand on Wednesday raised its benchmark interest rate for a fifth straight time and signalled that more tightening is on the horizon to return inflation to its target.

“With all the data that we have now, we think the rate normalisation should continue,” assistant governor Piti Disyatat said at a briefing after policymakers raised the one-day repurchase rate by 25 basis points to 1.75%.

The baht gained 0.3% to 34.194 to the US dollar, making it the top gainer among major Asian currencies on the day.

Wednesday’s decision by the central bank’s Monetary Policy Committee was unanimous and widely expected. The benchmark rate has now been increased by a total of 125 basis points since August last year.

Of the 22 economists polled by Reuters, 18 had expected the BoT to raise the key rate by a quarter point while the remaining four had forecast no change.

Headline inflation, gauged by the Consumer Price Index, was 3.8% year-on-year in February, declining for a second straight month and the lowest rate in 13 months. This followed 5% inflation in January and 5.9% in December.

A rebound in tourism is boosting activity and demand in the economy. Campaign spending for the May 14 general election is also seen as fanning price pressures.

The central bank has cut its headline inflation forecast for 2023 to 2.9% from 3.0%, and expects it to return to within the target range of 1-3% in the middle of this year.

It currently projects economic growth of 3.6% this year and 3.8% next year, compared with previous forecasts of 3.7% and 3.9%, respectively.

It said persistently high inflation remained a risk and the baht was highly volatile as global economic uncertainty had increased. However, the country’s financial systems were resilient, it added.

There is still room for lenders and borrowers to cope with rising financial costs from gradual rate increases, according to the BoT.

“The committee thus decided to increase the policy interest rate to normalise the monetary policy stance in a gradual and measured manner toward a level consistent with long-term sustainable growth,” the BoT said in a statement.

“Financial fragilities nonetheless remain for some SMEs and certain households exposed to rising living costs and higher debt burden. The Committee agrees that financial institutions should continue to press ahead with debt restructuring and deems it important to have in place targeted measures and sustainable debt resolution for vulnerable groups.”

The statement said the committee was ready to adjust the size and timing of future rate moves should the growth and inflation outlook shift.

Do you like the content of this article?

Prince Harry to make history with UK court testimony

LONDON: Prince Harry will become the first senior British royal to give evidence in court for more than a century when he testifies this week against a tabloid newspaper publisher.


Nationalist Israelis set for new Jewish temple on Al-Aqsa site

JERUSALEM: With imported sacrificial cows, ancient hymns and growing support, some nationalist Jews hope to rebuild their temple in Jerusalem's Old City, at a site at the heart of Israeli-Palestinian tensions.


Most Asian shares rise, oil prices up after Saudi output cuts

SYDNEY: Most Asian share markets rose on Monday on optimism the Federal Reserve would pause its rate hikes this month after a mixed US jobs report, while oil prices jumped after Saudi Arabia pledged big output cuts.