Thai central bank may raise rates

The Bank of Thailand may raise interest rates as the Robust economic performance and the end of some product price caps will give

Thailand's economy grew 9 percent in the second quarter from the same period last year, and by 0.2 percent from the previous quarter. Those results topped forecasts by most observers who expected the Thai economy to take a hit because of red shirt protests during April and May.

Domestic consumption expanded fin the second quarter, while exports recorded a 40 percent year-on-year growth in the period. Full-year export expansion of at least 25 percent is now expected.

It is anticipated the central bank's Monetary Policy Committee would increase its benchmark one-year repurchase rate today by 25 basis points to 1.75 percent. It would be the second increase after rates after a year that saw no increases.

A further increase to 2 percent is expected by the year’s end with the rate possibly reaching 3 percent in 2011.

The Thai baht has also risen in value and that is another factor in hiking the rates. Experts say if the interest rates rise too much and too often that would attract

capital inflows. The baht has strengthened by 5.7 percent since the beginning of the year.