THAILAND’S central bank chief said on Friday it was appropriate to pause interest rates for now and keep them at a neutral level, following an unexpected hike this week designed to anchor inflation, which remained a concern going forward.

On Wednesday, the central bank unexpectedly raised its key interest rate by a quarter point to 2.50 per cent, the highest in a decade, saying growth and inflation would pick up next year.

Bank of Thailand (BOT) Governor Sethaput Suthiwartnarueput told reporters the policy objective was getting the landing right and the current rate was appropriate for the economy.

He said it would remain that way for a while and was “not that restrictive”.

He noted the baht had been volatile, but said that was being driven by external factors and Wednesday’s rate hike was not to address the weakness of the currency.

Monetary policy would take time to take effect on the economy, he said, adding the interest rate was now the lowest in the region and not high when compared to expectations for inflation, which he remained worried about.

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The central bank on Wednesday predicted headline inflation at 1.6 per cent this year and 2.6% next year, with core inflation seen at 1.4 per cent and 2.0 per cent, respectively. The BOT targets headline inflation in a range of 1 per cent to 3 per cent.

Despite cutting its 2023 economic growth forecast to 2.8 per cent from 3.6 per cent projected earlier, the central bank raised its 2024 growth outlook to 4.4 per cent from 3.8 per cent. Last year’s growth was 2.6 per cent.

On Wednesday it said growth next year would driven by domestic demand, underpinned by a steady tourism recovery and a turnaround in merchandise exports, with additional support from government policies.

Thailand’s economy grew 1.8 per cent in the April-June period on the year and 0.2 per cent on the quarter, sharply slowing from the previous three months, 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. REUTERS