The Bank of Thailand (BoT) will raise interest rates gradually to ensure a smooth take-off as it fights inflation, its governor said on Wednesday.
Keeping inflation under control is key but there is no need for aggressive, heroically large rate hikes, BoT governor Sethaput Suthiwartnarueput told the Thailand Focus 2022 business forum.
"We need to make sure the recovery is intact.
“We get that smooth take-off, and that the financial system continues to function well," Mr Sethaput said at the forum.
Chances are low for aggressive policy tightening unless necessary, he told reporters on the side-lines of the forum.
Earlier this month, the central bank's Monetary Policy Committee voted 6-1 to raise its key interest rate for the first time in nearly four years, by 25 basis points to 0.75%, to curb inflation. It will next review policy on Sept 28.
According to minutes of the BoT meeting on Wednesday, gradual rate hikes were consistent with the country's growth and inflation.
Monetary policy normalisation should be done in a gradual and measured manner in the period ahead, the minutes said.
The governor also said the baht has been volatile but there have been no unusual capital movements, and the BoT will only act on excessive moves in the currency.
Inflation should peak in the third quarter before falling back within the BoT's target range of 1-3% around the middle of 2023, he told the forum.
The transmission of the policy rate to commercial banks' rates has been slow as the economic recovery remained fragile and uneven, Mr Sethaput said.
- 3.0-3.5% growth forecast -
At the business forum, Finance Minister Arkhom Termpittayapaisith said the Thai economy is resilient and expected to expand 3.0-3.5% this year.
The government will continue to invest to support growth, Mr Arkhom said.
Fiscal space remains ample should more stimulus measures be needed, he added.