MPC’s goal is to maintain economic, pricing stability: secretary

Piti’s comment came after the MPC on Wednesday raised the policy interest rate by 25 basis points to 1.00 per cent per annum in a bid to tame the impact of inflation on economic growth.

The latest hike by a 0.25 percentage point followed a similar increase last month.

Piti said the committee voted to raise the policy rate because the economy was still recovering, driven by tourism and private sector spending, while inflation remained high.

The MPC has been evaluating the baht’s trend and believed its current value (at 37.93 baht to the US dollar in opening trade on Thursday morning) would not impact Thailand’s overall economy and inflation due to three main reasons:

First is the fact that the weakening of the baht has been caused primarily by a strengthening US dollar due to a series of Federal Reserve rate hikes.

Secondly, Thailand has no problem regarding fund outflows as investors still view the country as having high potential thanks to its substantial foreign reserves – placing the kingdom sixth highest in the world – while the country’s reserves are three times bigger than its foreign debts.

“Lastly, the weakening of the baht has been beneficial to exporters. As for importers who face higher costs, they usually mitigate the impact by planning ahead and using financial tools,” Piti said.

He insisted the MPC is monitoring the baht value closely and will employ “suitable financial measures if necessary to achieve its goal” to maintain the stability of the economy, pricing and financial system.

“The MPC will not use any drastic measure just for the sole purpose of stabilising the baht,” he promised.

The committee has raised its estimate of this year’s headline inflation from 6.2 to 6.3 per cent and next year’s from 2.5 to 2.6 per cent. It also reduced its GDP growth estimate next year from 4.2 to 3.8 per cent, while 2022 GDP was forecast at 3.3 per cent.

The MPC, however, expected the tourism industry to flourish this year and raised its estimate of foreign arrivals from 6 million to 9.5 million visitors in 2022, and from 19 million to 21 million in 2023.

Rung Sa-Nguanreuang, senior director of Global Markets Business Promotion at Bank of Ayudhya, said the bank expects the MPC to raise the policy rate again by 0.25 percentage point in its next meeting on November 30, and twice within the first quarter of 2023, with the rate staying at 1.75 per cent early next year.

The tourism industry alone might not be adequate to keep the baht afloat, she said, estimating that the Thai currency could start becoming stronger as late as the first quarter of 2023.