Thailand Central Bank to Raise Interest Rate by 25 Points to Counter Inflation

According to a poll, Thailand's central bank is expected to raise interest rates by 25 basis points to combat high inflation, and further increases are likely even as China's reopening brightens the economic outlook.

Unlike its neighbours in Malaysia and Indonesia, the Bank of Thailand (BOT) is expected to continue tightening policy. While inflation in Southeast Asia's second-largest economy has slowed, it was still 5.89% in December, well above the central bank's 1-3% target.

On January 25, 21 of 23 economists polled expected the BOT to raise its benchmark one-day repurchase rate by 25 basis points (bps) to 1.50 percent. The other two predict no change.

"Given inflation is still high and you have upcoming demand-side pressures coming from the recovery of tourism...the BOT would like to continue normalizing rates in a gradual and measured manner," said Aris Dacanay, economist at HSBC.

"Because of mainland China reopening borders much earlier and much faster than a lot of people expected...we do expect Thailand to grow faster than trend. This gives the BOT room to continue hiking rates, to continue anchoring inflation expectations."

Thailand, one of Asia's most popular tourist destinations, is expected to receive at least five million Chinese tourists and a total of 25 million foreign visitors this year, giving its battered economy a much-needed boost.

Poll medians showed inflation would average 2.8% this year and then fall to 1.9% in 2024.