The Bank of Thailand (BOT) also said it was concerned that the baht's recent rise could affect the recovery and would consider measures if needed. Assistant Governor Titanun Mallikamas said the BOT would hold a briefing on Friday, sending the baht lower.

The BOT's Monetary Policy Committee (MPC) voted unanimously to keep the one-day repurchase rate at 0.50%, as widely expected in a Reuters poll.

While the economy has rebounded recently, the recovery would be slow, "fragile and highly uncertain," the MPC said in a statement.

"The Committee ...voted to maintain the policy rate at this meeting and to preserve the limited policy space in order to act at the appropriate and most effective timing," it said.

It said it would monitor various risks including political uncertainty when deciding on monetary policy and said fiscal measures would continue to play an "important role".

Southeast Asia's second-largest economy shrank by less than expected in the third quarter, rebounding from its worst slump in 22 years, as easing coronavirus restrictions boosted domestic demand, while private investment also improved.

But a continued ban on foreign tourists, a strong baht and escalating political protests are expected to weigh on the tourism-reliant economy and consumption this year.

"The country's success in controlling the virus has allowed most of the restrictions on movement and commerce to be lifted," said Gareth Leather, senior Asia economist at Capital Economics.

"However, with the tourism sector showing little sign of improvement, the recovery will struggle to gain traction," he said, adding rates will need to remain low for a long time.

The baht was 0.53% lower against the U.S. dollar at 30.31 at 0941 GMT, after the currency hit its highest level in more than 10 months on Monday.

The central bank has previously said it has no baht level targets and would intervene only to smooth out excessive moves.

The BOT has already cut the key rate by 75 basis points this year and provided soft loans and debt relief programmes. The government has planned to borrow 1 trillion baht ($33 billion) to mitigate the coronavirus impact.

Kobsidthi Silpachai, head of capital markets research of Kasikornbank, expected the BOT to cut rates in the first quarter of 2021 as a "precautionary buffer against potential shocks".

(Graphic: Thailand's policy rate, GDP and CPI: )

($1 = 30.15 baht)

(Additional reporting by Satawasin Staporncharnchai; Writing by Ana Nicolaci da Costa; Editing by Kim Coghill)

By Orathai Sriring and Kitiphong Thaichareon