Bank of Thailand raises rates again and maintains 2022 growth trend

Thailand’s central bank has raised its key interest rate to curb the highest inflation in 14 years and ensure a sustained economic recovery while leaving its growth forecast for 2022 at 3.3%. The Bank of Thailand (BOT) said the policy rate should be gradually normalized but is prepared to respond with further rate hikes if needed.

The recovery of Southeast Asia’s second-largest economy is lagging behind other countries as the important tourism sector is just beginning to recover. As investment continues to stagnate, the central bank is slowly raising interest rates despite the fact that many countries have seen huge increases.

The Monetary Policy Committee (MPC) has unanimously decided to raise the key interest rate by 0.25% from the current 0.75% to 1.00%, effective today (September 28).

The committee in June kept its 2022 growth forecast at 3.3% and lowered its 2023 growth forecast to 3.8% from 4.2%.

The Bank of Thailand raised its forecast for headline inflation in 2022 to 6.3% from 6.2% previously and to 2.6% in 2023 from 2.5%.

After the announcement of the Bank of Thailand’s interest rate, the baht continued to depreciate, falling by 0.8%.

From April to June, the economy grew by 2.5% year-on-year and by 0.7% compared with the previous three months. Last year’s economic growth of 1.5% was the lowest in Southeast Asia.

Headline inflation was 7.86% in August, the highest level in 14 years and above the BOT’s target range of 1% to 3%.

Thailand’s central bank said Wednesday the baht’s weakening has not affected the overall economy and that inflation will gradually slow, decline at the end of this year, and return to the target range next year.

Exports are also expected to rise 8.2% this year, up from a forecast of 7.9% in June.

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