Bank of Thailand (BoT) Governor Tarisa Watanagase on Thursday said the policy interest rate is likely to increase before the end of this year if the economy continues growing satisfactorily. She said whether the Monetary Policy Committee raises the policy interest rate at its next meeting on July 14 depended mainly on the global economic situation and local political developments which impact consumer and investor confidence.

“The overall picture of the Thai economy remains not different from we had projected earlier. The economy may slow down to a certain extent due to the local political unrest while inflation is expected to edge up. Given these factors, we may need to adjust the monetary policy from the outset. At least, we may raise the interest rate once by the end of this year if the economy remains stable,” she said.

via Policy interest rate likely to rise before year-end, says BoT chief.

Last week the Bank of Thailand (BoT) continued the key interest rate unchanged at a record low of 1.25 per cent, reasoning that uncertainties related to the impact of sovereign debt problems in Europe and the domestic political situation remain key risks to Thailand’s growth outlook.

BoT assistant governor Paiboon Kittisrikangwan announced the outcome of the Monetary Policy Committee (MPC) meeting on Wednesday.

Global economic outlook has improved since the last MPC meeting, supported by continued growth in the US, Japan and particularly in Asia. However, sovereign debt problems in some European economies may dampen the region’s recovery and pose risks to the sustainability of global growth. The MPC will closely monitor the outcome of measures taken to resolve problems and restore confidence in Europe.

The Thai economy expanded in the first quarter of 2010 at a stronger pace than anticipated. This was driven by strong growth in exports and tourism, on the back of global economic recovery. Also, domestic demand, especially private investment, continued to expand. In April, economic activities slowed down somewhat, partly owing to adverse impacts of domestic political situation on tourism as well as confidence of consumers and businesses. Meanwhile, inflation remains low at present but is projected to

increase in the periods ahead.

If the Greek debt crisis and the global economy improve, the MPC may revise its forecast that the Thai economy is likely to grow over 5.8 per cent, higher than 4.3-5.8 per cent projected earlier, he said.

In April, economic activities slowed somewhat owing in part to adverse impacts of the domestic political situation on tourism as well as confidence of consumers and businesses.

Global economic outlook has improved since the last MPC meeting, supported by continued growth in the US, Japan and particularly in Asia. However, sovereign debt problems in some European economies may dampen the region’s recovery and pose risks to the sustainability of global growth. The MPC will closely monitor the outcome of measures taken to resolve problems and restore confidence in Europe.increase in the periods ahead.