The Bank of Thailand (BOT) has said it wants to continue normalizing interest rates, adding that the recent election and efforts to form a new government should have no bearing on monetary policy.
Despite recent rate hikes, Thai interest rates are still low due to cuts during the pandemic and the central bank has pledged to gradually return them to normal levels consistent with long-term economic growth prospects.
BOT Deputy Governor Mathee Supapongse told reporters that there is no need to wait and see what policies are formulated by the parties that won the May election before deciding whether or not to raise rates further.
He noted that the policies of all political parties are largely aimed at stimulating the economy, but the effect of monetary policy will take time to be felt.
Mathee also said Southeast Asia’s second-largest economy is in recovery and is expected to return to its potential growth level next year.
Last week, BOT raised its key interest rate by a quarter point to 2.00%, citing elevated core inflation. It has increased the rate by a total of 150 basis points since August.
The BOT will next review policy on August 2, when some economists see a rate pause given falling inflation.
Annual headline inflation in May slumped to its lowest in 21 months of 0.5%, below the BOT’s target range of 1% to 3%, while the core inflation rate stood at 1.55%.
Mathee said the below-target inflation was seen as temporary and this year’s average figure should stay within the target range.
The central bank, however, said it was ready to adjust the pace and timing of policy normalization if the outlook for growth and inflation shifted. (NNT)
