Key interest rate hikes will slowly cool down Thailand’s inflation

0
1480
Don Nakornthab, a director at the bank’s Financial Stability Department, said the rate was still low compared with an average of 2% over the past two decades, “so it will take a while to reach that level”.

The Bank of Thailand (BOT) raised its key interest rate for the first time in nearly four years on Wednesday (10 Aug) to counter surging inflation, signaling further gradual increases as an economic recovery gains momentum.

The BOT, which had been among Asia’s least hawkish central banks, raised its one-day repurchase rate to 0.75% from 0.50% as consumer inflation hovers near 14-year highs.



Its monetary policy committee (MPC) said further hikes would be carried out “in a gradual and measured manner consistent with the growth and inflation outlook”.

Don Nakornthab, a director at the bank’s Financial Stability Department, said the rate was still low compared with an average of 2% over the past two decades, “so it will take a while to reach that level”.



Thailand had maintained its policy focus on supporting the economic recovery, which has lagged its neighbors due mainly to tourism curbs during the COVID-19 pandemic. The vital tourism sector has just begun to recover as restrictions were eased.

Driven by energy prices, consumer prices rose 7.61% in July from a year earlier – far above the BOT’s target range of 1-3%.

The bank said it expected inflation to remain high for the rest of the year before gradually falling to its target range in 2023 as supply-side price pressures eased.

Piti Disyatat, secretary of the MPC, said in a statement that “The Thai economy is projected to continue recovering with strong momentum” from higher-than-expected foreign tourism activity.

He added that it should return to its pre-pandemic level by the end of 2022 “and will continue to gain traction”. (NNT)