UPDATE 1-Bank of Thailand, resisting pressure, holds rate
(Adds details, comments)
* C.bank keeps policy rate at 2.75 pct, as expected
* Says inflation pressures increases slightly
* Says it will closely monitor capital inflows
BANGKOK, Feb 20 (Reuters) - Thailand's central bank left its benchmark interest rate unchanged at 2.75 percent on Wednesday, resisting government pressure to cut it and saying the economy could grow more than forecast this year.
The Bank of Thailand (BOT) said its seven-member monetary policy committee (MPC) voted 6 to 1 in favour of no change in the one-day repurchase rate. The committee left the rate steady at its two previous meetings as economic trends improved.
Thirteen of 17 economists polled by Reuters had expected Wednesday's meeting to keep the rate at 2.75 percent, ignoring government pressure to ease policy in spite of robust growth.
But the other four predicted a quarter-point cut partly because of pressure from Finance Minister Kittirat Na Ranong to reduce the rate.
Kittirat has advocated lower interest rates to help exporters and stem capital inflows, which have pushed the baht up around 2.7 percent this year. This month, the minister said he had written to the central bank - which historically has zealously guarded its independence from government - to press his case.
The baht briefly extended gains to 29.78 per dollar, up 0.3 percent from Tuesday, after the decision. It stood at 29.81 as of 0733 GMT.
The committee said it would monitor capital inflows closely.
"The economy is expected to grow faster than previously projected in the periods ahead, with domestic demand being a key growth driver together with a gradual recovery of exports," a committee statement said. "Inflationary pressure has risen somewhat, as a result of an increase in oil prices."
ROOM FOR RATE HIKES?
Gundy Cahyadi, economist at OCBC Bank in Singapore, said the statement was "slightly biased to the hawkish side" and he continued to see room for rate hikes later this year.
To many economists, there seems to be little reason for further policy accommodation after Southeast Asia's second-largest economy grew a much stronger-than-expected 3.6 percent in the final quarter of 2012 from the previous three months, with the annual rate a record 18.9 percent, although flood-hit base effects dominated.
For all of 2012, Thailand grew 6.4 percent. The central bank's forecast for 2013 growth - which it hinted it might raise - is 4.9 percent.
(Additional reporting by Amy Sawitta Lefevre and Paul Carsten; Editing by Richard Borsuk)