By Reuters and published by CNA
THAILAND’S central bank raised its key interest rate by 25 basis points for a third straight meeting on Wednesday, as it tries to contain above-target inflation while supporting an economic recovery facing increasing global headwinds.
The Bank of Thailand’s (BOT) monetary policy committee voted unanimously to raise the one-day repurchase rate to 1.25 per cent, as widely expected in a Reuters poll.
The BOT trimmed its growth forecasts for this year and next, pointing to downside risks to the global outlook, but expected the strength in the tourism sector to lessen the impact of any global slowdown. It raised its inflation forecast for 2023, even as it expected inflation to return to within target next year.
“The Committee deems that a gradual policy normalisation remains an appropriate course for monetary policy given the growth and inflation outlook,” the BOT said in a statement.
With Wednesday’s move, the BOT has raised rates by a total of 75 basis points since August.
But the tightening cycle has been less aggressive than many of its regional peers as Thailand’s economic recovery has lagged that of other Southeast Asian countries, with its crucial tourism sector only starting to rebound this year.
Thailand’s economy is expected to expand 3.2 percent in 2022 and 3.7 percent in 2023, Assistant Governor Piti Disyatat told a news conference. That was down slightly from previous forecasts for 3.3 percent growth this year and 3.8 percent next year.
The BOT raised its 2023 inflation forecast to 3 percent from 2.6 per cent previously, Piti said, even as Thailand’s consumer price index rose at its slowest pace in six months in October. At 5.98 percent year-on-year, the headline consumer inflation remained above the central bank’s 1 percent-3 percent target last month.
The central bank said in the statement it would “continue to closely monitor risks to inflation, especially a potential increase in cost pass-through as well as domestic energy prices which remain uncertain.”
Gareth Leather, senior Asia economist at Capital Economics, said the comments made the central bank sound “a little more hawkish on inflation than in previous meetings”.
“The BoT faces a difficult balancing act over the coming months. It needs to keep raising interest rates to help contain inflation, while ensuring that it doesn’t kill off the economic recovery by tightening too quickly,” he said, adding he expected interest rates to peak at 1.75 percent.
Kobsidthi Silpachai, head of capital markets research of Kasikornbank, saw the BOT increasing rates by another 50 bps in 2023.
“Given the heightened uncertainties surrounding the global economy, the Committee is ready to adjust the size and timing of policy normalisation should the growth and inflation outlook shift from the current assessment,” the BOT said.
The baht was up 0.5 percent after the rate hike while Thai stocks stood 0.5 percent higher at 3 p.m.. The BOT said the currency remained highly volatile and was being closely monitored.
The BOT said tourism and private consumption will continue to be “key economic drivers” going forward.
It forecast foreign tourist arrivals of 10.5 million this year, and 22 million in 2023, up from previous forecasts of 9.5 million and 21 million, respectively. Some 40 million foreign tourists visited Thailand in 2019.
The central bank expected exports to rise 7.4 percent this year and 1.0 percent next year. It had previously forecast export growth of 8.2 percent in 2022 and 1.1 percent in 2023.
The Bank of Thailand logo. Photo: Matichon
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