Bank of Thailand 'ready' to adjust tightening pace

Bank of Thailand 'ready' to adjust tightening pace

Governor insists baht is not 'unusually weak' and inflation is relatively tame

A woman walks past a foreign exchange kiosk on Khaosan Road, Bangkok. (Photo: Nutthawat Wicheanbut)
A woman walks past a foreign exchange kiosk on Khaosan Road, Bangkok. (Photo: Nutthawat Wicheanbut)

The Bank of Thailand (BoT) is ready to adjust the pace of tightening monetary policy if needed and would be prepared to hold an off-cycle meeting if necessary, governor Sethaput Suthiwartnarueput said on Thursday.

On Wednesday, the central bank raised its key interest rate by a quarter point at its regular meeting to 1.00% to curb inflation.

The country’s core inflation is expected to peak in the fourth quarter, while Thailand’s economic recovery remains intact, Mr Sethaput told reporters.

He said the weak baht was being driven by a strong dollar and was not “unusually weak”, but the BoT would be ready to act on excessive moves.

The baht has been trading at 16-year lows against the dollar. It has depreciated 12.4% against the greenback so far this year at 16-year lows against the dollar.

Meanwhile, headline inflation was 7.86% in August, a 14-year high, and far above the central bank’s target range of 1% to 3%.

The BoT on Wednesday predicted average headline inflation of 6.3% this year and 2.6% next year.

Mr Sethaput defended the central bank’s overall strategy of gradual monetary policy tightening, saying inflation is nearing its peak and a slump in the baht posed no significant risk to the nation’s economy.

A day after the Monetary Policy Committee (MPC) reaffirmed the BoT’s status as the region’s least hawkish major central bank — the governor said “a gradual and measured” approach suited the Thai context where the growth is uneven and not yet back to the pre-Covid levels.

While headline inflation is expected to peak this quarter, core prices that strips out volatile energy and fresh food prices, may decelerate from the final quarter, Mr Sethaput said, adding “if inflation is different from our expectations, we are ready to reconsider our approach.”

The MPC, he said, has has shunned the aggressive approach to rate hikes followed by other central banks in the region, arguing it wants to ensure a “smooth take-off” for the economy as opposed to the so-called soft landing being pursued by developed economies and others growing at a faster clip. 

“The Thai economy isn’t overheating like the US,” Mr Sethaput said Thursday. “Our economy hasn’t fully recovered. We have fragile groups. Raising rate like the US won’t be suitable for us.”

The central bank this week maintained its 2022 economic growth outlook of 3.3% seen in June, and trimmed its 2023 growth forecast to 3.8% from 4.2% for 2023. The economy grew 2.5% from a year earlier in the April-June period.

Last year, Southeast Asia’s second-largest economy expanded by just 1.5%, among the slowest pace in the region.

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