On Wednesday, the Bank of Thailand (BoT) raised its benchmark interest rate by an additional 25 basis points to 2.00%, making it the sixth straight increase since August of last year.
Analysts and economists noted the necessity to maintain financial stability and control inflationary pressures in the midst of a robust economic recovery and global concerns as reasons why the action was widely anticipated.
The central bank also lowered its prediction for headline inflation in 2023, noting that it should continue to fall gradually. Due to declining power and oil costs, headline inflation has returned to the target range and is anticipated to be 2.5 and 2.4 percent in 2023 and 2024, respectively. Additionally, core inflation is anticipated to stabilize around 2.0 percent in 2023 and 2024, which is higher than in the past.
The BoT also pointed out that the baht had lost value relative to other major currencies over the previous month, which was a result of increasing volatility on the world’s financial markets. The central bank announced that it would closely monitor changes in currency rates and capital flows and take the necessary steps to ensure the market operates efficiently.
The BoT’s most recent rate increase will contribute to a reduction in the real interest rate differential with other Southeast Asian nations, which could encourage capital inflows and lessen external imbalances. Analysts cautioned, however, that additional tightening might harm consumer confidence and economic development, particularly for small and medium-sized businesses (SMEs) and families with large debt loads.
The BoT stated that it would keep an eye on economic developments and evaluate if further monetary policy adjustments were necessary, taking into account both internal and foreign factors that might have an impact on inflation and growth.
