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Thai central bank hikes key interest rate by 25 bps By Reuters

Thai central bank hikes key interest rate by 25 bps

© Reuters. FILE PHOTO: FILE PHOTO: Thailand’s central bank is seen at the Bank of Thailand in Bangkok, Thailand April 26, 2016. REUTERS/Jorge Silva/File Photo/File Photo

BANGKOK (Reuters) – The following is a statement from the Bank of Thailand after it unanimously raised its key interest rate by 25 basis points to 1.50% on Wednesday, as expected by economists in a Reuters poll.

Piti Disyatat, Secretary of the Monetary Policy Committee (MPC), announced the outcome of the meeting on Jan. 25, as follows:

The Thai economy will continue to gain traction with continued recovery in tourism and private consumption thanks to the return of Chinese tourists. Meanwhile, merchandise exports will slow down this year but are expected to improve in 2024 in line with the global economic recovery.

Headline inflation is expected to decline, whereas core inflation remains at a high level with increased risks from demand-side inflationary pressures due to the economic recovery. The Committee deems that a continuing gradual policy normalization is an appropriate course for monetary policy consistent with the growth and inflation outlook, and thus votes to raise the policy rate by 0.25 percentage point at this meeting.

The Thai economy is projected to continue growing. The tourism sector will exhibit a faster recovery following the return of Chinese tourists. This will contribute to a more broad-based improvement in employment and income of services sector and self-employed workers, which account a significant share of total employment. Such improvements will support the continued expansion of private consumption.

Meanwhile, growth of merchandise exports will moderate this year, but is expected to resume in 2024 in tandem with global growth which is projected to bottom out in 2023. The Committee assesses that downside risks to the global economy have decreased given the improving outlook in both advanced economies and China.

Headline inflation is projected to decline. Supply-side inflationary pressures will continue to dissipate along with a decline in global energy and commodity prices. Core inflation is expected to remain at a high level for some time before gradually decreasing. Meanwhile, medium-term inflation expectations remain anchored within the target range.

However, there is a risk that core inflation would remain high for longer than expected owing to a potential increase in pass-through given elevated costs. Moreover, the tourism recovery could…

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