Thailand's central bank raised interest rates by 25 basis points for the second straight month on Wednesday but said rates were still too low, reinforcing market views of another rise at its next meeting in October.
Citing growing inflation and faster-than-expected growth in Southeast Asia's second-biggest economy, the Bank of Thailand raised its one-day repurchase rate to 1.75 percent, as expected. That followed a similar rise last month from a record low.
"Although global economic growth will slow down in the second half, the Thai economy still has room to expand," Assistant Governor Paiboon Kittisrikangwan told a news conference. But the pace of Thailand's strong export growth would slow, he added. Eight out of 11 economists surveyed by Reuters after the interest-rate increase expect Thailand's benchmark policy rate to rise to at least 2 percent by year-end. Three economists expect it rise further to 2.25 percent.
"We expect one more 25-basis-point hike at the central bank's next meeting in October," said Usara Wilaipich, an economist at Standard Chartered Bank in Bangkok. "After that, we expect the policy rate to be on hold at 2.0 percent until the end of the third quarter of next year."
Prasarn Trairatvorakul, who will become the central bank's next governor in October, said on July 15 that he expected the policy rate to be at 2.0 percent by year-end. Thailand in July joined other Asian countries, including India, Malaysia, Taiwan and South Korea, in unwinding easy monetary policies as their export-driven economies rebound from the global crisis and inflationary pressures surface.
India's central bank said on Tuesday it may have to give precedence to containing inflation over other policy objectives as it had emerged as a major concern. "The rate rise is in line with broad optimism for strong economic growth. Global uncertainty would probably be limited for Thailand this year with the economy supported by sound fundamentals," said Kevalin Wangpichayasuk, an economist at Kasikorn Research Centre in Bangkok.
Thailand's economy unexpectedly grew in the second quarter as strong export growth offset political violence over April and May that killed 91 people and hurt tourism and private consumption. In its statement, the central bank said private consumption was continuing to grow "favourably", while tourism had shown clearer signs of recovery.
Manufacturing production and capacity utilisation gains should also boost private investment, it said. Central bank chief Tarisa Watanagase, who steps down at the end of the September, told Reuters on July 28 that core inflation was likely to climb to the top end of the central Bank's target range of 0.5-3.0 percent next year.
Annual headline inflation rose to 3.4 percent in July from 3.3 percent in June while annual core inflation - which excludes energy and fresh food prices - inched up to 1.2 percent in July from 1.1 percent in June. The central bank cut the rate by 250 basis points from December 2008 to April 2009 to help lift the economy out of recession.
Comments
Comments are closed.