* Says key rate to stay at current level for a while
* Says ready to take action if outlook changes significantly
* Says economic recovery intact; worried about inflation
* Says baht very volatile
(Adds details, quotes from paragraph 3-9)
BANGKOK, Sept 29 (Reuters) - The rise in Thailand's interest rates should be paused "for now", its central bank chief said on Friday after a surprise hike in the policy rate to a decade high earlier this week.
On Wednesday, the central bank unexpectedly raised its key rate by a quarter point to 2.50%, saying growth and inflation would pick up next year.
It was the eighth hike since August last year, when the rate stood at a record low of 0.5% and the Bank of Thailand (BOT)began tightening policy to curb inflation and foster a smooth economic recovery.
The recovery of Southeast Asia's second-largest economy is intact and the current "rate is appropriate", BOT Governor Sethaput Suthiwartnarueput told reporters.
"We should pause for now," Sethaput said, adding that the current level was "not that restrictive" and was the lowest in the region.
However, the BOT is ready to take action if there are significant changes to economic growth, inflation and financial stability, he said, adding "there might be a need to adjust interest rates".
He noted the baht had been highly volatile, driven by external factors and concerns over government policies. But he said Wednesday's rate hike was not in response to the baht exchange rate, which has weakened by 5.4% against the dollar so far this year.
The main reason for the hike was to get the rate to a "neutral" level, Sethaput said.
Monetary policy would focus more on the outlook and it would take time to take effect, he said, adding the key rate was not high when compared to expectations for inflation, which he remained worried about.
The BOT on Wednesday predicted headline inflation will rise from 1.6% this year to 2.6% next year, with core inflation seen at 1.4% and 2.0%, respectively. The BOT targets headline inflation in a range of 1% to 3%.
Despite cutting its 2023 GDP growth forecast to 2.8% from 3.6% projected earlier, the BOT raised its 2024 growth outlook to 4.4% from 3.8%. Last year's growth was 2.6%.
On Wednesday the central bank said growth next year would be driven by domestic demand, underpinned by a steady recovery in tourism and a turnaround in exports and support from government policies.
The economy grew 1.8% in the April-June period on-year, sharply slowing from the previous quarter, as exports slumped.
The governor also said he would be meeting new Prime Minister Srettha Thavisin on Monday, but did not know what the agenda would be. (Reporting by Orathai Sriring, Kitiphong Thaichareon and Satawasin Staporncharnchai; Editing by Martin Petty & Simon Cameron-Moore)
