The Bank of Thailand (BOT) has raised its key policy rate to a nine-year high to control inflation and maintain policy flexibility amidst a highly uncertain economic outlook.
The BOT’s monetary policy committee voted unanimously to raise the policy rate from 2.00% to 2.25%, bringing the key policy rate to its highest since early 2014.
The BOT said in a statement that while the Thai economy has been showing signs of improvement thanks to tourism and private consumption, a delay in export recovery and internal political concerns have increased the risks to the economic outlook.
The statement said, “Monetary policy should keep inflation sustainably within the target range and foster longer-term macro-financial stability by preempting the buildup of financial imbalances that could arise in a low-for-long interest rate environment.”
BOT Assistant Governor Piti Disyatat told a news conference that lower energy prices, cost-of-living subsidies, and a high comparative base from last year all contributed to a drop in headline inflation, which is projected to rebound in the second half of this year.
He noted that higher food prices, along with a more severe El Nino phenomenon, may exacerbate cost pass-through in the context of ongoing growth in the economy.
Looking forward, Piti said the BOT will consider the economic and inflation outlook, as well as associated risk assessments, in deliberating a further policy rate hike.
Thai headline inflation eased further to 0.23% year-on-year in June, the lowest level in 22 months, dropping below the BOT target range of 1-3% for the second straight month. (NNT)
