BANGKOK, Aug 27: The Bank of Thailand raised interest rates 25 basis points to 3.75 per cent on Wednesday in a bid to tame soaring inflation, despite government concern about the impact on slowing economic growth.

The move came in the wake of reports that the bank and the finance ministry have been at loggerheads over borrowing costs, and against a background of political uncertainty in one of Southeast Asia’s biggest economies.

Bank of Thailand assistant governor Duangmanee Vongpradhip said economic growth had slowed in the second quarter to an annual rate of 5.3 per cent due to waning domestic demand, lower government spending and high inflation.

Thai inflation reached a decade high of 9.2 per cent in July, but Duangmanee said interest rates were now at the right level.

“This is the appropriate level that can anchor inflation expectations,” she said in a statement.

“Lower oil prices and the effect of the government’s anti-poverty measures have reduced inflationary pressure,” she said, but added inflation was still expected to remain relatively high given the volatility in world oil prices.

Economists now expect the central bank to leave rates unchanged for the rest of the year as oil prices have fallen back from record levels hit in July.

The bank had “sent the signal that it has taken care of inflation and has curbed inflation expectations,” Thanomsri Fongarunrung, an economist at Phatra Securities, told Dow Jones Newswires.—AFP