The Bank of Thailand’s Monetary Policy Committee (MPC) maintains that in order to lower the high inflation rate, it had to raise its policy interest rate by 0.25% to 1.50% yesterday for the fourth time in a row.
Piti Disyatat, the secretary of the MPC Committee, said that the vote was unanimous.
Rate increases may occur temporarily under a gradual policy normalization if they are appropriate for the Thai economic climate. In upcoming meetings, the group will also talk about a terminal rate.
According to reports, the MPC increased the rate by 0.25% to 0.75% in August 2022, the first time in four years, as a response to persistently high inflation.
In order to combat the excessive inflation, the committee then increased the rate by 0.25% at each of its next meetings in September, November, and most recently. According to the MPC, a gradual normalization of monetary policy is warranted given the outlook for inflation and growth.
The Thai economy is expected to expand further, with the tourism industry showing signs of a quicker recovery in the wake of the return of Chinese tourists. This will help the employment and income of self-employed people and those employed in the services sector, which make up a sizable portion of the labor market, increase more broadly.
Such advancements will help private consumption flourish indefinitely.
The growth of merchandise exports is anticipated to slow this year before picking up again in 2024 in tandem with the anticipated 2023 bottoming out of the global growth rate.
The MPC thinks that because both developed economies and China are displaying an improving outlook, the downside risks to the global economy have diminished. As a result, the central bank raised its forecast for foreign arrivals this year from 22 million to 25.5 million, and lifted its prediction for 2024 from 31.5 million to 34 million.
The committee believes that headline inflation will likely decline as supply-side inflationary pressures continue to subside and as the price of commodities and energy around the world decline.
“While medium-term inflation expectations are predicted to stay stabilized within the target range, core inflation is anticipated to first remain at a high level before progressively declining.
There is a chance, nevertheless, that core inflation will continue to be high for a longer period of time than anticipated due to a potential rise in pass-through given high expenses.
The committee wants to keep an eye on demand-side inflationary pressures, which the tourism recovery could exacerbate.
According to a recent report from the Commerce Ministry, an increase in energy prices will be the main cause of 2022’s headline inflation rate of 6.08% on an annual basis.
According to the MPC, the baht has risen in value versus the US dollar as a result of anticipations of a less aggressive Federal Reserve monetary tightening and China’s relaxation of its travel restrictions, both of which would help the Thai tourism industry.
The MPC also stated that it would keep an eye on changes in the financial markets and volatility in foreign exchange rates. The baht is currently 4% to 5% stronger than the dollar and 2% stronger than other major currencies.
Piti claimed that since late last year, the world economy has shown more encouraging trends.
He continued by saying that there is now a greater chance of a “economic soft landing” for the US economy.
