Thailand's central bank unexpectedly raised its key interest rate for an eighth straight meeting on Wednesday, despite slowing economic growth, below-target inflation and rising global uncertainties.
The Bank of Thailand's (BOT) monetary policy committee voted to hike the one-day repurchase rate (THCBIR=ECI) by 25 basis points (bps) to 2.50%. The rate has now been raised by 200 bps points since August 2022.
The Thai baht pared losses after the surprise tightening, and was last down 0.3% at 36.483 per U.S. dollar.
Only six of the 27 economists polled by Reuters had predicted a quarter-point hike, while the remaining 21 had forecast no policy change.
"Monetary policy should aim to keep inflation sustainably within the target range, foster long-term macro-financial stability, and ensure sufficient policy space given uncertain outlook," the BOT said in a statement.
The central bank cut its 2023 economic growth forecast to 2.8% from 3.6% projected earlier, but raised its 2024 growth outlook to 4.4% from 3.8%. Last year's growth was 2.6%.
"The Thai economy overall continued to recover in 2023, albeit at a slower pace due to soft external demand," it said.
"Growth should however pick up in 2024 from domestic demand, underpinned by a steady tourism recovery and a turnaround in merchandise exports, with additional support from government policies."
Southeast Asia's second-largest economy grew just 1.8% year-on-year in the April-June quarter, much slower than expected and less than the previous quarter, as shrinking exports and lower investments undercut strength in tourism.
Thailand's new government, which took office last month, has approved a raft of new policies, including waiving visa requirements for visitors from China, in a bid to stimulate the economy.
The central bank said on Wednesday it expected foreign visitor arrivals of 28.5 million this year and 35 million next year, versus a previous forecast of 29 million and 35.5 million, respectively. Pre-pandemic 2019 saw a record of nearly 40 million foreign tourists, whose spending accounted for more than 11% of GDP.
Headline inflation was seen at 1.6% this year, compared with 2.5% projected earlier, the central bank said, while raising its 2024 forecast to 2.6% from 2.4% seen earlier.
The BOT predicted core inflation at 1.4% this year and 2.0% in 2024, versus a previous forecast of 2.0% in both years.
Thailand's headline inflation(THCPI=ECI) was 0.88% in August, below the central bank's target range of 1% to 3%. Core inflation stood at 0.79%.
The central bank said exports, a key driver of Thailand's growth, were seen falling 1.7% this year, and up 4.2% next year, versus a previous projection of a 0.1% dip and a 3.6% rise, respectively.
