16-8-2023 (BANGKOK) The Governor of the Bank of Thailand (BOT) stated on Wednesday that the country’s current benchmark interest rate is at a nearly balanced level. He also assured that the delay in the formation of a new government would not affect monetary policy.
Over the past year, the BOT has increased the key rate seven times, reaching 2.25 percent, in an effort to control inflation and support a steady economic recovery.
Governor Sethaput Suthiwartnarueput, speaking at a central bank seminar, expressed confidence in the ongoing economic recovery and emphasized that the BOT would ensure that its monetary policy remains appropriate for the long term. The aim is to maintain inflation sustainably within the target range of 1 to 3 percent.
He stated, “It’s near a balanced point, where the key rate allows the economy to grow to its potential and inflation remains within the target range without posing vulnerabilities to the economic system.”
The delay in government formation following the May elections is not expected to impact the implementation of the central bank’s policies. However, the governor acknowledged that it could affect capital movement and the value of the Thai baht, which has weakened by 2.5 percent against the US dollar so far this year.
Political factors have been cited as a cause for recent baht depreciation due to the uncertainty they create.
Thailand has been under a caretaker administration for the past five months due to political deadlock after the Move Forward party’s failure to form a government despite winning the election.
Regarding inflation, Sethaput mentioned that the headline rate is currently lower than expected but is anticipated to return to the target range in the future.
Last week, the governor stated that the BOT might maintain or increase the key rate at its upcoming policy meeting on September 27.
The minutes from the monetary policy meeting on August 2 also indicated that policy rates were approaching stability levels.
Sethaput highlighted that Thailand’s economy, the second-largest in Southeast Asia, has been driven by domestic consumption and tourism. He projected foreign tourist arrivals to reach 29-30 million this year.
However, he cautioned that second-quarter gross domestic product (GDP) data might not be as strong due to softer exports. The official second-quarter GDP data is scheduled to be released on August 21.
