The Bank of Thailand (BOT) recently said Thailand’s current level of the benchmark interest rate was nearly balanced, adding that monetary policy would not be affected by a delay in the formation of a new government.
The BOT has raised its key rate seven times to 2.25% since last August to tame inflation and help foster a smooth economic recovery.
Governor Sethaput Suthiwartnarueput told a central bank seminar that as the recovery remained intact, the BOT would ensure its monetary policy was suitable for the longer term, with inflation sustainably in the target range of 1% to 3%.
He said, “It’s near a balanced point, where the key rate allows the economy to grow as its potential and inflation is within the target range without creating vulnerability to the economic system.”
According to the governor, a delay in the formation of a government following the elections in May would not impact the central bank’s policy implementation, but capital movement and the baht.
Sethaput said, “Political factors have weakened the baht lately as they created uncertainty.” The baht has lost 2.5% against the dollar so far this year.
Thailand has been under a caretaker administration for five months as deadlock prolongs after the election-winning Move Forward party’s failure to form a government.
Commenting on inflation, Sethaput said the headline rate was lower than expected but would later return to the target.
Earlier this month, the governor said the BOT might hold or hike the key rate at its next policy meeting on September 27.
Minutes from the monetary policy meeting on August 2 also said policy rates were approaching stability levels.
The BOT governor said Southeast Asia’s second-largest economy has been driven by consumption and tourism, with foreign tourist arrivals predicted at 29-30 million this year.
He added, however, that second-quarter gross domestic product (GDP) data might not be “that good” because of softer exports.
The economy expanded 2.7% year-on-year in the first quarter, helped by tourism. (NNT)
