Thailand’s central bank raised its key interest rate for the fifth straight meeting on Wednesday citing persistently high inflation as a key risk and hinted at more tightening to bring inflation back to the target.
The Monetary Policy Committee of the Bank of Thailand unanimously decided to lift the policy rate by 25 basis points to 1.75 percent. This was the highest rate since August 2019.
The committee decided to increase the policy interest rate to normalize the monetary policy stance in a gradual and measured manner toward a level consistent with long-term sustainable growth, the bank said in a statement.
“The Committee is prepared to adjust the size and timing of policy normalization should the evolving growth and inflation outlook differ from the current assessment,” the bank added.
The bank forecast the economy to expand 3.6 percent this year and 3.8 percent in 2024. The broad-based recovery in tourism should promote employment and labor income, and in turn, underpin economic growth, the central bank said.
The committee expects headline inflation to return to the target range of 1-3 percent by mid-2023 and is projected to fall to 2.9 percent and 2.4 percent in 2023 and 2024, respectively.
Policymakers observed that persistently high inflation remains a risk, as producers could pass on higher costs absorbed in the past and demand-side pressures could pick up as the recovery gains traction.
A sharp drop in inflation will allow the central bank to hold fire and that this would mark the end of the tightening cycle, Capital Economics’ economist Shivaan Tandon said.
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