Finance minister and central bank agree on inflation target of 1-3%
MoU provides for regular consultations and coordination on fiscal and monetary policies
Finance Minister Pichai Chunhavajira and Bank of Thailand (BOT) Governor Sethaput Suthiwartnarueput have agreed on an inflation target of between 1% to 3% next year and on cooperation to prevent deflation.
The agreement was stated in a memorandum of understanding between the two, which was approved by the Cabinet on Tuesday.
The MoU states that the 1-3% inflation target would be appropriate for maintaining price stability and good coordination between the government’s economic policies and monetary policies of the central bank.
The MoU noted that the inflation framework of 1-3% was a middle-term and inflation goal of 2025.
The MoU marks a change in tone between the two sides, after the Pheu Thai-led coalition’s run-ins since coming to power in 2023 over the BOT’s interest rate policies.
The Finance Ministry and the BOT would take actions to ensure that inflation remained within the target framework – not much lower or higher than the framework – the MoU said.
Under the MoU, the two sides accepted that the framework would be flexible and appropriate for the Thai economy, whose size is still small and open-ended.
The two sides would hold consultations regularly or when necessary to coordinate fiscal and monetary policies. The BOT would also use multiple tools, including policy rate and measures to protect the value of the baht, to keep the inflation target within the framework.
The MoU added that the Finance Ministry and the Monetary Policy Committee (MPC) of the BOT agreed that both sides did not want to see deflation or negative inflation for a long time due to a weak economy.
The MoU states that the MPC would report its operations to the government every six months.
