The Bank of Thailand (BOT) has said any hikes in its benchmark interest rate to tame above-target inflation would be gradual, as the economy faces a slow recovery and a weakening baht currency.
The BOT is one of the few major Asian central banks to have kept rates at record lows since the pandemic began, but it recently signaled a policy shift as inflation surged to a near 14-year high in May.
Senior Director Sakkapop Panyanukul told a trade seminar that headline inflation will remain high this year but should fall back into the BOT’s target range of 1-3% in the second quarter of 2023.
The BOT predicts inflation of 6.2% this year and 2.5% next year, and economic growth of 3.3% in 2022 and 4.2% in 2023.
Sakkapop also said Southeast Asia’s second-largest economy is expected to return to its pre-pandemic growth level late this year or early next year. He added that the baht had weakened quite fast and would be more volatile, driven by fast-rising U.S. interest rates.
The senior director noted that there have been “clearer signs of capital outflows” in June, adding that the central bank “would take care of the baht if the market moves beyond fundamentals”.(NNT)
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