Thailand hikes policy interest rate by 0.25% to curb inflation

BANGKOK, June 1 (TNA) - The Bank of Thailand’s (BOT) Monetary Policy Committee has unanimously hiked the country’s policy interest rate by 0.25 per cent, marking the highest shift over a 32-month period.

Paiboon Kittisrikangwan, BOT’s Assistant Governor for Monetary Policy, confirmed the hike on Wednesday, pushing the country’s policy interest rate to stand at 3 per cent from 2.75 per cent earlier.

The increase was recorded as the fifth consecutive rise since December 1, 2010.

Paiboon said the move was aimed at slowing down inflation, which rose faster than expected due to higher prices of ready-to-eat foods from rising production costs.

Soaring oil and commodity prices had also continued to push inflation rates, which could exceed the 3 per cent mark in the third and fourth quarters of this year.

In May, the country’s headline inflation rate rose by 4.19 per cent.

Despite the latest increase, the real interest rate still stood at -1.2 per cent, with the interest rate being low enough to facilitate economic growth.

Without any radical factor, the policy interest rate was expected to move gradually. However, the Monetary Policy Committee said it would revise its policy immediately if needed, including raising the policy interest rate over 0.25 per cent at a time.

Meanwhile, Mr Paiboon said he was concerned about populist policies of political parties, which could influence public spending, and impact inflation rates and economic growth in the future.

The BOT official added the Thai economy expanded well in the first quarter of this year, due partly to Japan’s quick recovery from the March 11 disaster.

The recovery had relieved the Thai automotive industry after a short hiccup from material shortages, he said. (TNA)