MPC hikes key interest rate by 25 basis points


After holding the interest rate for more than two years during the pandemic, the Monetary Policy Committee (MPC) on Wednesday decided to raise the policy rate by 25 basis points to 0.75 per cent.

MPC secretary Piti Disyatat said after the meeting that six members voted to raise the policy rate by 25 basis points, while one member voted for a 50 basis points hike.

He said the economy was likely to recover gradually, thanks to an increase in foreign visitors after the easing of travel restrictions.

He added that private sector consumption was also likely to recover, due to the improvement in the labour market and household income.

He expected Thailand's economy to reach the pre-Covid-19 level by the end of this year.

"The committee concluded that a loose monetary policy to support the economy amid the Covid-19 crisis has become less necessary, as the economy is likely to recover," he said.

However, he added that the committee would follow up on rising production cost and the impact of the cost of living on Thailand's economic recovery.

He expected inflation to remain high this year before declining next year.

Piti added that the country's financial system is now stable, as commercial banks have strong capital and reserves, while the business and household sectors' ability to repay debt has improved in line with economic recovery.

However, he said measures to relieve the debt burden are necessary for some vulnerable groups, especially small and medium-sized enterprises and low-income households.

He added that the financial markets would be vulnerable to high volatility, as the baht has weakened against the dollar amid uncertainty about a global economic slowdown and the monetary policy direction of the US Federal Reserve.

"The committee agreed that raising the policy interest rate to meet economic expansion in the long term should be done gradually, in line with economic context and inflation," he concluded.