Thailand raises key rate by a quarter point to 1% as expected

THAILAND’S central bank increased the benchmark policy rate for the second straight meeting to tame the fastest inflation in 14 years and shore up the battered baht.

The Bank of Thailand’s monetary policy committee voted to unanimously raise the one-day repurchase rate by 25 basis points to 1 per cent on Wednesday (28 Sep), as forecast by 18 of 23 economists in a Bloomberg survey, with the rest predicting a 50-basis-point hike. 

Even after Wednesday’s move, the BOT continues to be among the least hawkish in Asia, where many counterparts including India and the Philippines moved early and aggressively to tighten policy amid high inflation and weakening currencies. The Federal Reserve’s hawkish approach to return price gains to target only exposes emerging markets in the region to the risk of more capital outflows, which in turn will weaken their currencies further.

The baht’s recent decline to a 16-year low against the dollar raised concerns about rising production costs and imported inflation, with price gains already touching a fresh 14-year high of 7.86 per cent in August. 

That prompted the nation’s interim leader Prawit Wongsuwan to direct the finance ministry to “talk” with the central bank about the currency, while separately clarifying that the government won’t undermine the BOT’s independence. BLOOMBERG