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Thailand hikes interest rates for first time since 2008

BANGKOK (AFP) -- Thailand's central bank raised its key interest rate Wednesday for the first time in almost two years, saying the economy had remained resilient in the face of deadly political unrest.

It was the latest vote of confidence in the economic outlook by monetary policymakers in Asia, coming on the heels of similar moves in Taiwan, India, Malaysia and South Korea.

"The economy should continue to grow," the Bank of Thailand said in a statement explaining its decision to lift its benchmark lending rate by 25 basis points to 1.5 percent.

"The impact of the domestic political situation on the Thai economy in the second quarter proved to be limited," it said, following the end in May of two months of mass opposition protests.

"The tourism industry has shown signs of a quick recovery while consumption and production were little affected."

Previously the Bank of Thailand had held its benchmark rate steady for more than a year, after a series of cuts to shield the economy from the fallout of the global financial crisis.

It last raised rates in August 2008.

Experts predicted the Bank would tighten its monetary policy again later this year as it withdraws emergency stimulus measures.

"The Bank of Thailand will gradually raise its policy rate two more times, in August and October, to 2.0 percent by the year-end," predicted Usara Wilaipich, senior economist at Standard Chartered Bank Thailand.

She expects the Thai economy to grow by 4.1 percent this year but said the fallout from the political unrest and an uncertain global climate were clouding the outlook after the blistering first-quarter performance.

The street protests by the anti-government "Red Shirts" paralysed parts of Bangkok and descended into several outbreaks of violence that left 90 people dead and nearly 1,900 injured, ending in a bloody army crackdown.

The demonstrations forced several major malls and upscale hotels to close temporarily and led to a steep fall in the number of foreign tourists visiting Thailand.

Overall exports, however, have remained strong, hitting the highest level in almost two years in May and reviving confidence in the economy, which grew at a double-digit year-on-year pace in the first quarter of 2010.

In the latest sign of strength, industry figures showed that domestic car sales in June soared 62.6 percent year-on-year to 70,557 vehicles.

Passenger car sales jumped 75.7 percent or 32,946 units in the month while commercial vehicle sales rose 52.5 percent or 37,611 units, according to Toyota Thailand, which compiles the industry-wide data.

"Small passenger cars were very popular and there were continued gains for commercial vehicles as an economic recovery and improvement in the political climate boosted consumer confidence," Toyota said in statement.

-- (c) Copyright AFP 2010-07-14

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Policy rate raised to 1.50 pct

For the first time in almost two years, the Bank of Thailand's Monetary Policy Committee on Wednesday decided to raised the benchmark repurchase rate from 1.25 per cent to 1.50 per cent as the Thai economy is expected to expand by 4.3 to 5.8 per cent this year.

This tightening of the monetary policy is meant to curb rising inflation which is expected to exceed the 0.5 to 3 per cent target range.

-- The Nation 2010-07-14

[Pib]

Well, this rate increase will probably cause the baht to appreciate a little more (i.e. you get fewer baht in exchange for your dollars, euros, pounds, etc)

[gregb]

It usually took about 3 months for Bangkok Bank to lower their MLR, and the subsequent cost of my mortgage, when the rates were lowered over the past 2 years.

What do you want to bet they manage to raise the MLR by tomorrow?

[Pib]

No, I think it will take at least two days.