Thailand central bank says policy tightening won't disrupt recovery

BANGKOK, June 27 (Reuters): A tightening of Thai monetary policy will be conducted so it does not disrupt the recovery of Southeast Asia's second-largest economy, central bank officials said on Monday, reinforcing market expectations of interest rate hikes later this year.

Thailand's economy will continue growing this year and next, driven by domestic demand and tourism, and could beat forecasts despite a risk that inflation will be higher than expected, Bank of Thailand (BOT) officials told an analysts' meeting.

The BOT will try to prevent the economy from overheating, which would cause demand-driven inflation, by gradually shifting from the current very accommodative policy, Assistant Governor Piti Disyatat told the meeting.

The BOT's task was to help the economy take off smoothly, he said.

"It's a challenge for monetary policy to release the accelerator pedal appropriately and timely so that the recovery has good momentum," Piti said, referring to the current record low-interest rate of 0.50%.

The speed of policy tightening would be determined by data and be in line with associated risks, he said, adding the BOT had no intention of springing surprises on markets.

The BOT has no plans to hold a special policy meeting as the remaining three scheduled meetings for this year slated for August, September and November were still appropriate, he said.

The central bank will next review policy on Aug. 10, when most economists expect the first rate hike since December 2018.

At the June 8 policy review, the BOT's committee voted four to three to hold the key rate. The three dissenters favoured a quarter-point rise.

The BOT sees economic growth of 3.3% this year and 4.2% next year, while headline inflation is forecast at 6.2% in 2022 and 2.5% in 2023.

Despite inflation breaching the BOT's target range of 1% to 3%, the BOT saw no reason to adjust the target, which remained appropriate for the economy in the medium term, Piti said.

Senior director Sakkapop Panyanukul said inflation should peak in the third quarter before gradually returning to target in the middle of 2023.

While noting a weak baht was affecting import costs, Piti said the currency might strengthen in the medium term as the dollar would not keep on rising once U.S. monetary tightening kept inflation under control.

Baht weakness was in line with regional currencies and the BOT would closely monitor and manage excessive volatility, said senior director Surach Tanboon.

Policy tightening would also reduce volatility in exchange rates and capital movements, he added. - Reuters

Article type: free
User access status:
Subscribe now to our Premium Plan for an ad-free and unlimited reading experience!

Thailand , BOT , Economic , Recovery , Right Path


Next In Aseanplus News

Asean News Headlines at 9pm on Sunday (Aug 14, 2022)
Indonesia deploys over 20 helicopters to fire-prone provinces after hot spots appear
China and Thailand kick off joint air force drills
Singapore taps satellite signals to monitor air moisture in effort to better predict weather
Indonesia July trade surplus seen narrowing amid slowing global trade
Philippine leader Marcos Jr threatens to fire officials in sugar mess
Vietnam reports 1,429 new Covid-19 cases and one new death on Sunday (Aug 14)
Tropical depression Mulan triggers flash floods at Thai-Myanmar border towns
Cambodia arrests 9,151 drug suspects, seizing 3.27 tons of narcotics in first seven months of 2022
Thai boxer dies from brain haemorrhage in Ambang Merdeka Muay Thai Championship 2022

Others Also Read