Thailand lifts interest rate to tackle inflation

BANGKOK: Thailand raised its benchmark interest rate on Wednesday for the fifth time in the past eight months in an attempt to curb inflation in the face of higher commodity prices.

The central Bank of Thailand increased the official cost of borrowing to 2.5 percent, up from 2.25 percent previously. It has ratcheted up its key rate by a total of 125 basis points since July 2010.

"The surge in oil and commodity prices has resulted in increased inflationary pressure," assistant governor Paiboon Kittisrikangwan said.

The bank lifted its inflation forecast for 2011 by 0.5 percentage points to 3.0-5.0 percent.

But "unless political unrest in the Middle East becomes widespread and affects global oil supply, the current spike in oil and commodity prices will not significantly impact the continuity of global recovery," Paiboon said.

Rising consumers prices have become a top concern for policymakers around the region. Thailand's move came a day after Vietnam's central bank raised two of its lending rates in an attempt to control double-digit inflation.

Thai inflation slowed marginally in February to an annual rate of roughly 2.9 percent, but the government predicted a pick-up in the future due to increased food costs.

Thailand raised its key interest rate in July last year 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 in early 2010.

Economists expect further steps to keep a lid on inflation.

"The market is not surprised by the decision and expects a series of increases in the near future in order to normalise the interest rate," said Mayuree Chowvokarn, an analyst at Kim Eng Securities.

The Thai economy returned to growth in the fourth quarter of 2010, snapping out of a brief technical recession on the back of solid exports and private consumption, official data showed last month.