Interest rate set to rise, but uncertain recovery clouds timing - BoT

Interest rate set to rise, but uncertain recovery clouds timing - BoT

Asoke junction along Sukhumvit Road, Bangkok. (Photo: Varuth Hirunyatheb)
Asoke junction along Sukhumvit Road, Bangkok. (Photo: Varuth Hirunyatheb)

Thailand's policy interest rate will have to rise but the timing will hinge on the monetary policy committee's view with the economy growing below its potential and the recovery facing uncertainty, the Bank of Thailand (BoT) board chairman said on Wednesday.

The comment was one of the first public remarks by a BoT official on tightening monetary policy since the central bank's Monetary Policy Committee (MPC) left its key rate at a record low of 0.50% in May 2020 after three cuts that year to mitigate against the impact of the Covid-19 pandemic.

"The rate has dropped to 0.50% and the next trend will have to go up... but it depends on when the MPC deems it appropriate," Porametee Vimolsiri told the seminar organised by Prachachat Turakij.

The MPC will next review policy on June 8. Some economists expect a rate hike in the fourth quarter to cool inflation, hovering near a 13-year high.

BoT governor Sethaput Suthiwartnarueput recently said the bank would ensure no disruptions to the recovery.

Mr Porametee said the recovery faced uncertainty with a prolonged Russia-Ukraine war and policy tightening in the United States and other countries to tackle rising inflation.

"It is called recovery on uncertainty" amid lower-than-expected growth and higher than expected inflation, he said.

The country's fiscal and financial position remained strong, but there was more limited room to support the economy as public debt rose, Mr Porameetee said.

The BoT has forecast economic growth of 3.2% and headline inflation of 4.9% this year, which is above its target range of 1% to 3% and will give updated estimates after the rate meeting.

Last week, the National Economic and Social Development Council cut its 2022 GDP growth to 2.5% to 3.5% from 3.5% to 4.5% and sharply raised its inflation estimate to 4.2% to 5.2%.

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