* Key rate hiked by 25 bps, as expected
* Rate rise was the first since Dec 2018
* C.bank says economy continues to gain traction
* C.bank says rate hikes to be gradual
* Sees inflation falling back to its target in 2023
(Adds official's comment on further hikes in paragraph 4)
BANGKOK, Aug 10 (Reuters) - Thailand's central bank raised
its key interest rate for the first time in nearly four years on
Wednesday to counter surging inflation, signalling further
gradual increases as an economic recovery gains momentum.
The Bank of Thailand (BOT), which had been among Asia's
least hawkish central banks, finally joined most of its peers,
raising its one-day repurchase rate to 0.75% from
0.50% as consumer inflation hovers near 14-year highs.
Its monetary policy committee (MPC) said further hikes would
be carried out "in a gradual and measured manner consistent with
the growth and inflation outlook".
A director at the bank's Financial Stability Department, Don
Nakornthab, said the rate was still low compared with an average
of 2% over the past two decades, "so it will take a while to
reach that level".
The Southeast Asian country had maintained its policy focus
on supporting the economic recovery, which has lagged its
neighbours due mainly to tourism curbs during the COVID-19
pandemic. The vital tourism sector has just begun to recover as
restrictions were eased.
Driven by energy prices, consumer prices rose 7.61% in July
from a year earlier, far above the BOT's target range of 1-3%.
The bank said it expected inflation to remain high for the
rest of the year before gradually falling to its target range in
2023 as supply-side price pressures eased.
The MPC voted 6-1 for the quarter point hike in the
benchmark rate from the record low it had been at since May
One member voted to raise the rate by 50 basis points,
saying that would reduce the risk of aggressive tightening later
on and adding that such a rate increase will not significantly
affect the economic recovery.
The rate was last raised in December 2018.
Seventeen of 20 economists surveyed by Reuters had expected
a quarter-point hike, with the remainder forecasting a
"The Thai economy is projected to continue recovering with
strong momentum" from higher-than-expected foreign tourism
activity, Piti Disyatat, secretary of the MPC, said in a
It should return to its pre-COVID level by the end of 2022
"and will continue to gain traction", he added.
He said the BOT may revise up its 2022 economic growth
forecast of 3.3% when it reviews it next month, with foreign
tourist numbers expected to beat its forecast of 6 million this
The Thai economy expanded 1.5% last year, among the slowest
in Southeast Asia.
"If inflation continues to weaken as we expect and growth
struggles, the central bank will take a gradual approach to its
tightening cycle. We think rates will peak at 1.5% next year,"
Gareth Leather of Capital Economics said.
Miguel Chanco, chief Emerging Asia economist at Pantheon
Macroeconomics, said Wednesday's hike was "inevitable and long
overdue" and will be followed by another 25 bps move next month.
"That said, if the MPC decides to pause in September, then a
hike in November probably should be ruled out, as the inflation
picture wouldve improved substantially.."
(Reporting by Orathai Sriring, Kitiphong Thaichareon, Satawasin
Staporncharnchai and Chayut Setboonsarng; Editing by Kim Coghill
and John Stonestreet)