Bank of Thailand Raises Policy Rate as Government Gears Up for Stimulus

By Kosaku Narioka

Thailand's central bank raised its policy rate to the highest in nearly a decade in a bid to mitigate the risks of stronger inflation due to the government's stimulus plans and the baht's recent weakening.

The Bank of Thailand said Wednesday that its policy committee voted unanimously to raise its one-day repurchase rate by 25 basis points to 2.50%, effective immediately. That is the highest level since November 2013.

Six of 11 economists polled by The Wall Street Journal had projected that the central bank would stand pat on its policy rate, while the remaining five forecast a quarter-percentage-point increase.

Some economists said that slow inflation and weak exports backed the case for a pause in tightening after a cumulative 1.75 percentage points of policy-rate increases since August last year, while others flagged persistent concerns about inflationary pressures going forward due to the government's fiscal stimulus and the Thai currency's depreciation.

The Thai baht has depreciated in recent weeks as the economy slowed. Earlier Wednesday, the currency hit a 10-month low of THB36.61 per dollar.

In August, the country's parliament picked real-estate tycoon Srettha Thavisin as the next prime minister after nearly a decade of army-backed rule. He has promised to boost the economy through stimulus measures.

Thailand's inflation has moderated in recent months. The consumer-price index in August rose 0.9% from a year earlier, following a 0.4% rise in July, compared with the central bank's inflation target range of 1.0%-3.0%.

Its gross domestic product in the second quarter grew just 0.2% from the previous quarter on a seasonally adjusted basis due partly to weakness in exports of goods, but rose 1.8% from a year earlier.

The Thai central bank began lifting its policy rate in August 2022 from a record low of 0.50%, in response to a surge in inflation caused by the Russia-Ukraine war and the recovery from the pandemic.

Write to Kosaku Narioka at [e-mail]

(END) Dow Jones Newswires

09-27-23 0326ET