Interest rate hike needed to curb inflation: Central bank chief

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BANGKOK, Aug 4 – An interest rate hike is necessary in order to keep the kingtdom’s inflation within the target range of 0.5-3 per cent, Bank of Thailand (BoT) Governor Prasarn Trairatvorakul said on Thursday.

“Implementation of monetary policy by raising the interest rate is necessary to keep inflation at bay,” he said. “How quickly and how high the interest rate will be raised depends on inflation acceleration.”

Mr Prasarn said inflation must be closely monitored and is worrying, as it will have a significant impact on the Thai economy both in the short and long terms. The short term effect will be on consumer behaviour, investment and production, and the long-term impact will be on the country’s economic stability and its economic improvement respectively.

Although the BoT’s Monetary Policy Committee previously adjusted the interest rates gradually from 1.75 to 3.25 per cent, the proportion of financial costs has risen 5 per cent of the total cost on average.

Most entrepreneurs in the private sector could handle the high financial costs in the past, and they believed that increasing interest rates would help prevent further inflation, which could otherwise result in higher material costs, Mr Prasarn said.

A Bank of Thailand survey, meanwhile, found that construction material costs now take up about 40 per cent of the total costs, as seen from the Construction Material Index from January to June, which was 5.8 per cent higher year-on-year.