The Monetary Policy Committee (MPC) voted 4 to 3 to maintain the policy rate at 0.50 percent. Three members voted to raise the policy rate by 0.25 percentage point.

The Bank of Thailand kept its key policy rate unchanged at 0.5%, amid growing pressure coming from rising prices and monetary policy tightening by its peers.

The Committee assessed that the Thai economy will continue to recover and could expand faster than previously expected owing to stronger domestic demand and the pickup in foreign tourists.

Headline inflation projected at 6.2 percent

Headline inflation is projected to be at 6.2 percent in 2022 and 2.5 percent in 2023. Inflation will exceed the upper bound of the target range in 2022 due to increasing domestic energy prices and higher cost passthrough that have broadened into wider ranges of products. 

The split of the Monetary Policy Committee (4 to 3) vote underscores the recent resurgence of inflation, which hit a 14-year high of 7.1% in May.

The Monetary Policy Committee’s projection for this year is that the country’s inflation will reach 6.2%, which is higher than the previous forecast of 4.9%.

However, the Committee also assessed that the Thai economy will expand at 3.3 percent in 2022 and 4.2 percent in 2023 on the back of better-than-expected recovery in domestic consumption, especially in the services sector. Foreign tourist arrivals also improved following the faster relaxation of border controls in Thailand and other countries.

Foreign arrivals this year are forecast to be 6 million, with the potential to increase to 19 million next year.

Overall financial system remains resilient. Commercial banks have high levels of capital fund and loan loss provision. Liquidity in the financial system remains ample, although liquidity distribution still varies across economic sectors. Some households and businesses remain vulnerable to rising living and production costs as their incomes have not fully recovered in addition to their high levels of debt.

The Bank of Thailand will keep the brake on interest rates, even as other central banks begin to tighten monetary policy, as long as inflation in Thailand remains contained to a small set of goods, its governor told Nikkei Asia in an exclusive interview. 

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