The Bank of Thailand (BOT) has confirmed that the nation’s policy interest rate remains low and further tightening will be gradual to curb inflation risks as the Thai economy continues to recover.
The BOT raised its main interest rate six times since August to 2% to tame inflation, with policymakers pledging a gradual return to normal levels consistent with long-term economic growth prospects.
However, BOT Deputy Governor Mathee Supapongse noted that the rate is still “low and probably the lowest” in Southeast Asia, which will help future investment. He added, “There won’t be any fast and aggressive rate hikes like in other countries.”
The central bank has said a gradual tightening strategy will help to ensure continued recovery in Southeast Asia’s second-largest economy, driven by tourism and private consumption. It has forecast economic growth of 3.6% this year and 3.8% in 2024. The economy expanded 2.6% last year.
The central bank’s next review of monetary policy is on August 2, with some economists expecting a further interest rate hike while others have forecast a pause owing to falling inflation.
While inflation is trending down, there is a need to monitor demand-side pressures and increases in costs as tourism gathers strength, according to Mathee.
He also said the policies of the winning parties in May’s national election would also add to inflation. The Move Forward and Pheu Thai parties have agreed to form a ruling coalition and both parties have promised big wage increases, among other pledges. (NNT)
