Thai central bank raises interest rate to 9-year high, Illustrative image (Source: AFP/VNA)

Bangkok - The Bank of Thailand (BoT) raised its key interest rate to a nine-year high on August 2, amid concerns about possible inflation and political instability.

The BoT's Monetary Policy Committee voted unanimously to raise the key interest rate by 0.25 percentage points to 2.25%.

Although inflation has eased every month since January and fell below the target of 1-3% set by the central bank in the past two months, policymakers are still working to ensure inflation at low level for a long time.

The BoT said the economy should continue to expand, driven mainly by the recovery of tourism and private consumption, but there are growing risks from weak exports and domestic political uncertainty, as efforts to form a new government drag on.

Headline inflation declined due to high energy prices, cost-of-living subsidies and a high base last year, but will rebound in the second half of this year, the BoT said in a statement.

Higher food prices, along with a more severe El Nino phenomenon, may exacerbate cost in the context of ongoing growth in the economy, it went on.

The central bank noted that merchandise exports have contracted in recent months, partly due to subdued demand from China and the global electronics cycle, but will pick up in the coming time as global economic activity gathers momentum.

Burin Adulwattana, chief economist at Kasikorn Research Center in Bangkok said that given the growing downside risks to growth and subdued inflation, this hike will likely be the last move in this cycle.