Thailand raises key rate for first time since '08

The Bank of Thailand increased the one-day bond repurchase rate by a quarter of a percentage point to 1.5 percent after keeping it unchanged in the past nine meetings, it said in Bangkok Wednesday. The decision was predicted by 13 out of 19 economists surveyed by Bloomberg News.

Thai consumer confidence rose for the second straight month in June even after the nation's worst political violence in almost two decades killed 89 people in April and May. Governor Tarisa Watanagase said last week the central bank will take “preemptive” steps to control inflation, as counterparts from Malaysia to Taiwan boost borrowing costs amid an Asian rebound.

“The sentiment is right for the central bank to start their normalization now,” Usara Wilaipich, an economist at Standard Chartered Plc in Bangkok, said before the decision.

Thailand's interest-rate swaps and bond yields have climbed as investors boosted bets the central bank will increase borrowing costs. The one-year onshore swap rate rose 30 basis points this month to 1.68 percent Wednesday, the highest since April 9. The yield on the 5.25 percent debt maturing in July 2013 has climbed 27 basis points to 2.7 percent, according to the Thai Bond Market Association. A basis point is 0.01 percentage point.

Overseas sales helped Thailand weather two months of anti- government protests that hurt tourism and disrupted manufacturing at some factories. The Cabinet on July 6 extended emergency rule in a quarter of the country, including Bangkok, for another three months after using troops to disperse opposition protesters in May.

Thailand's US$272 billion economy grew 12 percent in the first three months of this year, the most since 1995, as the global recovery spurred overseas orders. Exports rose 42.5 percent in May, the biggest gain since July 2008.

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