Thai central bank meeting discussed bigger rate rise

BANGKOK: Thailand's central bank said on Wednesday its Monetary Policy Committee (MPC) discussed raising rates by half a point at its meeting this month but most members wanted only gradual rises and it opted for a quarter point.

"Robust economic expansion, together with significantly increased inflationary pressure, led to some members discussing the possibility of a rate hike of 0.5 percentage point," it said in minutes of the meeting.

"Nevertheless, the majority of MPC members viewed that policy rate adjustment should be gradual while taking into account that the neutral rate depends on changing economic circumstances."

It raised its benchmark rate to 2.25 percent on Jan. 12. It has now raised rates four times since July 2010, by 25 basis points each time, to curb inflationary pressures, making it one of Asia's most hawkish central banks.

Economists expect it to raise the rate again at its next review on March 9.

This is the first time the Bank of Thailand has published minutes of a rate meeting. It will now publish them two weeks after each review.

The MPC assessed that inflation pressure has increased due to both cost-push and demand-pull factors, the minutes said.

"Increases in the minimum and civil service wages may boost consumption expenditure more than expected and lead to a rise in inflation expectations going forward," it said.

Some MPC members were concerned at the possibility of inflation possibly breaching its target this year, fears already expressed by central bank officials.

The central bank has forecast that annual core inflation would be 2.0-3.0 percent this year, near the top end of its target range of 0.5-3.0 percent, which it uses to guide monetary policy.

It jumped to 1.4 percent in December from 1.1 percent in November while the headline rate rose to 3.0 percent from 2.8 percent.

The MPC was worried about low real interest rates.

"Some MPC members were concerned that low real interest rates may foster financial imbalances, depress savings and lead to asset bubbles in the future," the minutes said.

Bank of Thailand Governor Prasarn Trairatvorakul holds an annual policy briefing later on Wednesday.

Last week, the central bank maintained its economic growth forecast of 3.0-5.0 percent for 2011 and kept its forecast of export growth of 11-14 percent.