Concerns about rising prices prompted the Bank of Thailand to hike its key interest rate to a nine-year high of 2.25%. The Bank of Thailand hiked its benchmark interest rate to 2.25%, citing price volatility and the need to keep inflation low in the long run.
Despite low inflation and a sustained economic recovery driven by tourism and private spending, authorities remain cautious due to weak exports, domestic political uncertainty, and the possible impact of a severe El Nino episode on food prices.
The central bank anticipates that inflation will return in the second half of the year as temporary factors fade, but analysts believe that this rate hike will be the last for the time being, given the downside risks to growth and moderate inflation.
Despite the fact that inflation is dropping and falling below the central bank’s objective, authorities want to keep it low. The central bank expects the economy to grow further, fueled by tourism and private consumption, but warns of dangers like as weak exports and political uncertainty.
They predict a resurgence in inflation in the second part of the year and believe this is the final rate hike for the time being. Industry organizations are concerned that the prolonged wait for a new administration could postpone investments and trade deals.
Inflation is expected to remain within the target range for the time being. It is crucial to recognize, however, that there are always dangers and uncertainties linked with inflation.
There is concern that the recent spike in food costs may cause inflation. This is because a severe El Nino episode could have a significant influence on agricultural productivity, resulting in supply shortages. Such supply shortages might lead to an increase in food prices, which would then drive up inflation.
The overall financial system is still strong, but individual SMEs and consumers may see their credit quality deteriorate. Financial conditions have gotten less accommodating, yet the economy is still recovering.
The value of the baht is influenced by predictions for US monetary policy, the Chinese economic outlook, and internal political uncertainty. In determining future policy rate rises, the Committee will continue to assess economic and inflation outlooks.
The central bank regularly watches these changes and takes them into account when deciding on future policy rate hikes. To preserve stability and long-term development, policymakers must strike a balance between supporting economic growth and regulating inflation.
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SOURCE: https://www.thailand-business-news.com
