Bank of Thailand Governor Sethaput Suthiwartnarueput on Tuesday warned that any move to raise the monetary authority’s inflation target may unanchor expectations and result in quickening price gains, which carries risks for economic growth.
“The current inflation target range is appropriate for the circumstances and it has worked well,” in terms of keeping inflation expectations anchored, the governor said in an interview with Bloomberg Television.
Raising the inflation target from the current 1%-3% range “increases the risk that expectations become unanchored,” he said. “If they become unanchored there is the risk actual inflation starts to pick up so we might see higher inflation. Once inflation expectations pick up so do borrowing costs for the government and the country as a whole could increase.”
“That’s another reason we feel the range based on the data now seems to be an appropriate range,” the governor said ahead of a planned review of the inflation goal beginning in August.
The Finance Ministry has sought to reset the inflation goal after consumer prices gains undershot the central bank’s target for 12 months before returning within the intended range in May. The BoT has spurned repeated calls from the government for rate cuts, arguing instead that structural reforms — and not cheaper borrowing costs — are what the economy needs to spur growth.
The Monetary Policy Committee last week kept the key interest rate steady at 2.5% for a fourth straight time as policymakers expect economic growth and inflation to pick up gradually this year. The voting tilted further towards a pause with only one member dissenting the decision, compared with a voting split of 5-2 in the past two meetings. The next rate meeting will be held on Aug 21.