In light of rising inflation pressure and the return of economic growth to its long-term trend, The Bank of Thailand has raised the policy interest rate by 0.25 percent per annum, from 2.00 to 2.25 percent per annum, effective immediately.
The Thai economy improved in the fourth quarter of 2010, due to domestic and external demands, which improved from the previous quarter, partly due to the acceleration in production and spending as the flood abated. In addition, exports and tourism posted better-than-expected growth. The economy is expected to grow robustly in 2011 due to strong growth in the fourth quarter of 2010, compared to the previous year and domestic consumption and investment, which continue to be supported by rising income, employment, and high capacity utilisation in certain sectors.
"Pressure on headline and core inflation, going forward, is expected to rise as a result of demand pressure and the clear upward trend in oil and commodity prices. Increasing costs of production are expected to lead to increasing product prices, partly due to pent-up pressure from delayed price adjustments," states the bank.
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