The Bank of Thailand (BoT) has increased its benchmark interest rate by another 25 basis points to 2.00% on Wednesday, marking the sixth consecutive hike since August last year.

The move was widely anticipated by analysts and economists, who cited the need to contain inflationary pressures and maintain financial stability amid a strong economic recovery and global uncertainties.

The central bank also revised down its headline inflation forecast for 2023 stating that inflation should continue to decline at a gradual pace. Headline inflation returned to the target range and is projected to be 2.5 and 2.4 percent in 2023 and 2024, respectively, due to easing electricity and oil prices. Moreover, core inflation is projected to stabilize at 2.0 percent in 2023 and 2024, an elevated level relative to the past.

The BoT also noted that the baht had depreciated against major currencies in the past month, reflecting increased volatility in global financial markets. The central bank said it would closely monitor exchange rate movements and capital flows, and use appropriate measures to ensure smooth functioning of the market.

The BoT’s latest rate hike will help narrow the real interest rate gap with other countries in Southeast Asia, which could support capital inflows and reduce external imbalances. However, some analysts warned that further tightening could hurt economic growth and consumer confidence, especially for small and medium-sized enterprises (SMEs) and households with high debt burden.

The BoT said it would continue to monitor economic developments and assess the need for further adjustments in its monetary policy stance, taking into account domestic and external factors that could affect growth and inflation.