Thailand's central bank raised interest rates Wednesday for the fourth time in the past six months, citing the prospect of rising inflation and solid economic growth. The Bank of Thailand increased the official cost of borrowing to 2.25 percent, up from 2.0 percent previously.
"Risks to global growth have declined," assistant governor Paiboon Kittisrikangwan said in a statement. "The economy is expected to grow robustly in 2011," he predicted. Domestic consumption and investment continued to be supported by rising income and employment, while inflationary pressures were expected to increase in future due to higher energy costs, Paiboon said.
Thailand's inflation accelerated to 3.0 percent in December as energy and food prices increased, data showed last week. The central bank raised its key interest rate in July 2010 for the first time in almost two years as the economy recovered from the global financial crisis and the fallout from deadly political unrest in Bangkok. Pichai Lertsupongkit, an analyst at Thanachart Securities, expects more hikes in the coming months.
"The central bank will gradually increase the rate this year." he said. The Thai economy remained relatively resilient in the face of violence in Bangkok in April and May of last year and observers believe it remains on a broad recovery path, notwithstanding a recent soft patch.
The economy slipped back into technical recession with a second straight quarterly contraction in the three months to September of last year, hit by a strong baht and a slowdown in US and European economic growth. Direct foreign investment in Thailand fell by almost a third last year, the Board of Investment announced Wednesday, although it said robust results were expected in 2011.
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