Inflation targeting framework a boon for Thailand, says BOT
The Bank of Thailand (BOT) has highlighted how its inflation targeting policy allows flexibility in pursuing multiple objectives, after its US counterpart adopted the same policy.
On Thursday, the US Federal Reserve announced a landmark switch to flexible inflation targeting – the same monetary policy used by Thailand.
Titanun Mallikamas, assistant governor of the BOT’s Monetary Policy Group, commented that the FED had changed its monetary policy framework to better align with new economic conditions.
The change will allow the bank to keep interest rates lower for longer, stimulating economic recovery to reduce unemployment.
The BOT’s Monetary Policy Committee (MPC) uses Thailand’s flexible inflation targeting framework to ensuring price stability in the medium term, and also to stabilise economic growth and preserve financial stability.
Flexible inflation targeting can take care of multiple policy objectives using different policy tools, depending on the nature and magnitude of shocks, explained Titanun.
In the current context, it allows the use of policy tools other than the interest rate, such as financial sector measures which include soft loans and debt restructuring, to ensure that growth, inflation, and financial stability objectives are met.
The BOT also routinely reviews the monetary policy framework to ensure it keeps pace with changing economic and financial environments, he added.
