The cabinet on Tuesday approved a monetary framework for 2022, with targeted inflation ranging between 1-3%.
Rachada Dhnadirek, a deputy government spokeswoman, said the headline inflation target is flexible and aligns with the economic forecast of a slow recovery because of prolonged Covid-19 outbreaks.
"According to the Finance Ministry's report, the rates for next year are considered flexible enough for the government to implement monetary policy to cope with any inflation volatility in the future," she said.
A source from Government House who requested anonymity said the Finance Ministry also reported to the cabinet yesterday the ministry and the Monetary Policy Committee will work together more closely to manage inflation if the rate is excessively volatile.
The Trade Policy and Strategy Office (TPSO) recently predicted Thailand's headline inflation would hit its highest level in a decade next year, reaching 3% from a range of 0.8% to 1.2% this year, driven by cost-push factors including rising prices of imported raw materials, a recovery in domestic demand, relatively high oil prices and a labour shortage.
The projection assumes the Omicron outbreak is not serious and the country's reopening brings about a recovery in economic activities and tourism as hoped, along with higher domestic demand and spending.
Other factors include a dearth of labour, higher prices of imported raw materials such as steel and fertiliser, as well as ongoing elevated oil prices.
Rising headline inflation may negatively affect salaried employees and farmers whose income does not move in line with rapidly rising expenses, said Ronnarong Phoolpipat, director-general of TPSO, suggesting the government should reintroduce subsidy schemes for water and electricity bills as well as other assistance measures to help reduce people's living costs.
The government's planning unit, the National Economic and Social Development Council (NESDC), recommended government monetary policy in 2022 should have more flexibility to support the country's economic recovery and ensure monetary and economic stability.
The NESDC said monetary measures should be implemented to alleviate the suffering of households and business sectors that have been reeling from the adverse impact of Covid-19 outbreaks.