MPC raised policy rate by 0.25%

Editorial Staff

MPC raised policy rate by 0.25%

The Monetary Policy Committee (MPC) voted unanimously to raise the policy rate by 0.25 percentage point from 1.50 to 1.75 %.

The Bank of Thailand’s assistant governor Piti Disyatat said the Thai economy should continue to expand, driven mainly by tourism and private consumption. Exports of goods are recovering and expected to gain strength in the second half of this year. However, the global economic uncertainty has increased, in part from persistent inflationary pressures and episodes of banking stresses in advanced economies.

The Bank of Thailand’s assistant governor Piti Disyatat

Headline inflation would likely return to the target range in the middle of the year, but core inflation remains elevated with upside risks from higher cost pass-through and demand pressures.

The Committee deems a continuation of gradual policy normalization to be appropriate in light of the growth and inflation outlook, and voted to raise the policy rate by 0.25 percentage point at this meeting.

The committee projects the economic growth to be 3.6 and 3.8 % in 2023 and 2024, respectively. A key impetus is the broad-based recovery in tourism, which should promote employment and labor income, in turn sustaining private consumption.

Exports show signs of rebounding after contracting at the end of last year, and should gather momentum in the second half of this year. However, persistently high inflation and banking stresses in some advanced economies pose risks to the global economic outlook.

Headline inflation would likely return to the target range by mid-2023, and is projected to decline to 2.9 and 2.4 % in 2023 and 2024, respectively. Easing supply-side pressures, notably from electricity and oil prices, are key contributing factors. Core inflation is projected to fall to 2.4 and 2.0 % in 2023 and 2024, respectively. However, persistently high inflation remains a risk, as producers could pass on higher costs absorbed in the past and demand-side pressures could pick up as the recovery gains traction.

The Committee agreed to continue to closely monitor price developments, as the situation remains fluid and uncertain, there is a need to closely monitor the developments and continuously assess potential impact on Thailand’s financial stability.

The Committee agrees that financial institutions should continue to press ahead with debt restructuring and deems it important to have in place targeted measures and sustainable debt resolution for vulnerable groups.