BANGKOK (Reuters) -Thailand’s central bank might hold or raise its key interest rate at its September review as the economy continues to recover, though it will lower its growth forecasts with exports remaining weak, the bank’s governor said on Wednesday.
The Bank of Thailand (BOT) has raised its main interest rate seven times to 2.25% since last August, from a record low of 0.50%, to tame inflation and help the economy with ‘smooth takeoff’.
Growth in Southeast Asia’s second-largest economy is now higher than pre-pandemic levels, while long-term inflation is expected to return to its target range, BOT Governor Sethaput Suthiwartnarueput told a central bank seminar.
As the economic context has changed, monetary policy has also changed to focus on “landing”, he said, from gradual and measured policy tightening.
“Next time, there is a chance that we’ll hold or hike (the key rate)… but we won’t cut,” Sethaput said.
“I haven’t said what our terminal rate is… our problem is about landing, getting the plane to land well,” he added.
The BOT has no need to raise the key rate above the ‘neutral’ level as it wants to ensure the economy is in a long-term potential growth range of 3% to 4%, with inflation sustainably in the BOT’s target range of 1% to 3%, Sethaput said.
Last week, the BOT raised its key rate by a quarter point and will next review it on Sept. 27, when some economists see no change, marking the end of its tightening cycle.
Sethaput said inflation was falling faster than expected, but it would gradually pick up again as the economy continues to recover.
However, he added the growth outlook would be reduced to the mid-3% range for this year and the next.
In May, the BOT forecast economic growth at 3.6% this year, and 3.8% for 2024. Last year’s growth was 2.6%.
“Exports have been soft due to global issues,” Sethaput said, adding private consumption and tourism would support the economy with 29 million foreign arrivals expected this year.
Second-quarter gross domestic product (GDP) might be softer but it did not mean the recovery was sputtering, he said.
The economy expanded by a more-than-expected 2.7% in the first quarter from a year earlier due to tourism. Official second-quarter GDP is due to be released on Aug. 21.
Sethaput also said he was not worried about a delay in the formation of a new government in Thailand, though its policies might affect economic stability.
The populist Pheu Thai party announced on Monday it was forming an alliance with the Bhumjaithai party and was open to other parties joining in to form a government nearly three months after elections.
Source: Economy - investing.com
