Responding to current inflationary trends and the depreciating baht, the Bank of Thailand has raised the policy interest rate by 0.25% as widely expected.

The rate increase by the Monetary Policy Committee (MPC) takes the policy rate to 1 percent per year. The central bank has also indicated it will gradually raise the policy rate to accommodate economic expansion.

The Committee deems that a gradual policy normalization remains an appropriate course for monetary policy, and thus votes to raise the policy rate by 0.25 percentage point at this meeting.

Monetary Policy Committee’s Decision 5/2022 (bot.or.th)

Thai economy projected to grow at 3.3 percent in 2022

The Thai economy is projected to continue growing at 3.3 percent in 2022 and 3.8 percent in 2023, driven mainly by tourism and private consumption. The tourism sector recovers faster than expected as the number of foreign tourists continues to rise. Moreover, the economic recovery has become more broad-based, both in terms of business sectors, especially services, and in terms of income distribution.

Meanwhile, the slower-than-expected global economy has an impact on Thai exports but would not derail the overall economic recovery.

Headline inflation expected at 6.3 percent in 202

Headline inflation is expected to be at 6.3 percent in 2022 before declining to 2.6 percent in 2023 due to falling global oil prices and gradual easing of supply chain bottlenecks. Core inflation is projected to be at 2.6 percent in 2022 and 2.4 percent in 2023, rising more than previously assessed mainly on the back of higher cost pass-through.

Government bond yields have gradually increased, while overall funding costs remain conducive for business financing.

Rapid depreciation of the baht against the US dollar

Under the monetary policy framework with objectives of maintaining price stability, supporting sustainable and full-potential economic growth, and preserving financial stability, the Committee judges that the Thai economy will continue to recover but with increased inflation risks. 

Monetary Policy Committee’s Decision 5/2022 (bot.or.th)

The depreciation of the baht against the US dollar has been rapid and continuous due to the strengthening of the US dollar but is still in line with regional currencies. The Committee will continue to closely monitor developments in the financial and exchange rate markets, especially in the period of heightened volatilities.

About the author

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Sign Up for Our Newsletter

Get notified of our weekly selection of news

You May Also Like

Thai Banking Sector Expected to Postpone Raising Interest Rates

Thai banks may not react immediately to increases in interest rates to support borrowers amid the gradual economic recovery in the second half of 2022, given the policy rate hike trend in the second half of this year.

APAC region records 119% QoQ growth in M&A deal value in Q2 2022

India, Australia and China were the top three countries when measured in terms of M&A deal value in Q2, with India accounting for half of the top 20 deals. South Korea, Indonesia, Malaysia, and Japan were the next top countries that contributed to a surge in M&A deal value.