Bangkok  - Thailand's central bank on Wednesday raised its benchmark interest rate for the first time in two years, hiking it 0.25 per cent to 3.5 per cent in an effort to curb inflation.

Duangmanee Vongpradhip, assistant governor of the Bank of Thailand's monetary policy division, said the hike to the bank's one-day bond repurchase rate was deemed necessary to keep inflation from getting out of control.

"The risks to inflation have risen markedly, which would affect private sector confidence, make it increasingly difficult to ensure economic stability going forward, and impact potential growth as well as the competitiveness of the Thai economy in the long run," Duangmanee said.

Thailand's year-on-year inflation jumped to 8.9 per cent in June, ramped up by rising fuel and food prices, and was up to 6.3 per cent for the first six months of 2008.

Economists had warned that inflation could reach the double digits in the second half of 2008 unless interest rates are raised. (dpa)