Thailand hikes key interest rate by 25 basis points
The Bank of Thailand’s Monetary Policy Committee (MPC) on Wednesday voted unanimously to raise the policy interest rate by 25 basis points to 1.50% aimed at controlling inflation.
MPC secretary Piti Disyatat said the rate hike took immediate effect.
The MPC made the decision based on continued economic recovery driven by private sector consumption and the tourism industry, thanks to the return of Chinese tourists this year after the country lifted travel restrictions, he said.
Piti added that exports are expected to slow down this year but would pick up in 2024 following the improving global economy, which is believed to pass the lowest point in 2023.
The MPC estimated that headline inflation this year would show a downward trend following the gradual decline in energy and consumer product prices. However, core inflation will remain at a high level, with a chance of rising further due to increasing demand driven by the economic recovery.
Piti said the committee would continue monitoring factors that could contribute to rising inflation, including rising manufacturing cost and the recovery of the tourism industry that could cause demand-pull inflation.
Piti added that the country’s overall financial system is stable with commercial banks having adequate funds and reserves, while the debt repayment of the business and household sectors was also improving following the economic recovery.
The MPC advised financial institutions to offer debt restructuring periodically to facilitate small and medium enterprises and vulnerable households that have suffered from increasing cost of living, and also roll out measures to solve debt problems in the long term.
The MPC forecast that the baht would strengthen against the US dollar, as it was widely expected the Federal Reserve would employ less aggressive interest rate adjustment. The influx of Chinese tourists will also contribute towards the baht strengthening. The committee said it would continue to closely monitor the situation and fluctuations in the global currency market.
The MPC said it would employ suitable monetary policies to ensure the stability of the financial system and promote Thailand’s economic expansion to its full potential.
The central bank’s previous rate adjustment was on November 30 of last year, when it hiked the rate from 1% to 1.25%, also in a bid to control inflation.