On Wednesday, Thailand’s central bank hiked its key interest rate for a second meeting to curb 14-year high inflation and ensure continued economic recovery. However, it is maintaining its 2022 growth projection of 3.3%.

The Bank of Thailand (BOT) said that the policy rate should be normalised gradually. It, however, indicated it was ready to respond with bigger rate hikes if necessary.

The recovery of Southeast Asia’s second-largest economy has struggled with that of other nations as its vital tourism sector has just begun to rebound while investment remains weak. This allows the central bank to go slowly on rate increases, despite bigger hikes by many peers.

The monetary policy committee of BOT unanimously voted to raise the one-day repurchase rate by 25 basis points to 1%. It maintained its 2022 economic growth outlook of 3.3% seen in June and trimmed its 2023 growth forecast to 3.8 per cent from 4.2% 2023.

Also, the BOT increased its 2022 headline inflation forecast to 6.3% from 6.2% seen earlier, and its 2023 estimate to 2.6% from 2.5%. The Thai baht currency extended losses after the BOT’s rate hike was announced and was last down 0.8%.

For the April-June period, the economy grew 2.5% from a year earlier and 0.7% from the previous three months. Last year’s economic growth of 1.5% was among the lowest in Southeast Asia.

On Wednesday, the bank said the baht weakness was not impacting the overall economy. Inflation would start decreasing gradually late this year and return to the target range next year.