Bank of Thailand surprises with rate rise
BANGKOK: Thailand's central bank surprised financial markets on Wednesday by raising its benchmark interest rate 25 basis points to 2.0 percent and made it clear there would be further tightening to curb inflation, pushing up the baht.
Most economists had expected no change because of uncertainty about the global economy and the likelihood of higher rates making the currency even stronger, when exporters were already complaining they were no longer competitive.
The central bank said the economy was expected to grow next year due to robust domestic demand, and repeated that keeping rates low for too long would cause problems.
Economists said its statement was surprisingly hawkish. "We keep our forecast of further rate rises, it's just a matter of time.
If the baht is not too strong and capital inflows are not heavy, we think they may gradually increase rates next year by at least another 75 basis points," said Thanomsri Fongarunrung, an economist at Phatra Securities.
The baht rose to 30.02 per dollar after the rate decision, against 30.09/14 beforehand. Five-year Thai government bond yields TH5YT=RR rose about 5 basis points to 3.05 percent.
The central bank had kept the rate steady at its previous meeting in October, pausing after increases in July and August that had taken the rate to 1.75 percent from a record low of 1.25 percent maintained since April 2009 to help the economy recover from the global economic crisis. -PB News