Key rate changed when economic outlook changes, BOT head says

Sethaput Suthiwartnarueput, governor of the Bank of Thailand (BOT), said the policy interest rate depends on the outlook for the economy. If the outlook changes, the monetary policy is ready to be changed. 

This was discussed in the previous Monetary Policy Committee (MPC) meeting. It was reflected in the latest MPC report that if the tight financial interconnectedness has a stronger impact on credit than it should, the policy is ready to be adjusted.

"The consideration of the policy interest rate will consider three important factors: economic growth, inflation, and financial stability. If we look at the overall picture of the current Thai economy from the latest GDP growth picture, it is considered to be as expected. Overall, there is a picture of it gradually approaching its potential," Sethaput said.

He added that the picture has not changed the MPC’s perspective, but it is admitted that there are risks in some dimensions that have increased, such as the decrease in private investment. However, overall, the economic projections are still close to what the MPC assessed.

"Meanwhile, inflation tends to gradually approach the lower range of the target inflation range of 1-3%. What is more important is to maintain inflation expectations at a low level. And we still don't see a picture of inflation falling to the point of deflation or causing consumption to continue to slow down," the governor said.

The last issue is financial stability, where the BOT sees the “tightening” of the financial situation from banks’ reduced lending, which has begun to have a linking impact on the overall economy. Therefore, it believes that if the situation has a more severe impact on financial stability than previously estimated, there is a chance that the MPC will adjust the policy interest rate.

“We are more open to adjusting interest rate policies according to changing circumstances. If the financial linkages are so tight that they affect credit quality more severely than they should be, we are ready to adjust the policy to be in line with this context,” Sethaput said.