Thailand's central bank signals further hike in rates

Bangkok: Thailand's central bank raised its benchmark interest rate and signalled further increases after the economy overcame political unrest to grow faster than estimated last quarter. The baht strengthened and stocks fell.

The Bank of Thailand increased the one-day bond repurchase rate by a quarter of a percentage point to 1.75 per cent after its first increase in almost two years last month, it said in Bangkok yesterday.

The decision was predicted by 11 out of 12 economists surveyed by Bloomberg News.

"Interest rates are on an uptrend," Bank of Thailand Assistant Governor Paiboon Kittisrikangwan told reporters in Bangkok Wednesday.

"Our interest rates remain very low compared to the economic growth even after the increase."

Southeast Asia's largest economy after Indonesia grew 9.1 per cent in the second quarter as exports countered the impact of political clashes that killed at least 89 people.

Paiboon said the central bank is "not concerned" that higher rates will attract capital inflows and pressure the baht to rise, even as the government this week urged the bank to ensure that its monetary policy doesn't spur currency gains.