As expected, MPC raises policy rate by 25 basis points to 2.25%
The Bank of Thailand's Monetary Policy Committee (MPC) raised its policy rate by another 25 basis points, from 2% to 2.25%, on Wednesday in line with market expectations.
Analysts said the move was aimed at pre-empting inflation as the Thai economy expands due to higher-than-expected growth in tourism and private consumption.
Piti Disyatat, secretary of the MPC, said the committee voted unanimously to raise the key rate.
The MPC said the economy was steadily recovering from the Covid-19 crisis. Although external demand has slowed somewhat recently, it is expected to gradually improve in the near future.
The Commerce Ministry has forecast that the median inflation rate for the rest of this year will be about 1.5%. Although inflation is modest, potential risks cannot be ignored, the MPC said.
As the economy is returning to its potential growth level, monetary policy should keep inflation within the target range and help strengthen the long-term stability of the financial sector, the committee agreed. This is achieved by preventing the accumulation of financial imbalances caused by an extended period of low interest rates for, it said.
Economic and political uncertainties were also factors in the MPC’s decision.
While tourism and private consumption are expanding, exports have contracted due to the slower recovery of the global economy, especially China’s.
While underlying inflation has decreased, it still remains higher than in the past, and there is a high risk of rising food prices if more severe weather events occur.
Overall, the financial system remains stable, the MPC said. Commercial banks have robust capital and reserve levels. However, credit quality may deteriorate for small and medium-sized businesses and households with high debt burdens and slow recoveries in income.
