By Orathai Sriring and Kitiphong Thaichareon
BANGKOK (Reuters) -Thailand’s central bank held its key rate at a record low to ensure a continued economic recovery but said upside risks to both growth and inflation were reducing the need for the current accommodative policy stance.
The Bank of Thailand (BOT) is likely to eventually follow other central banks by raising interest rates to counter pressures from surging global prices.
“The committee deems that a very accommodative monetary policy will be less needed going forward,” the BOT said in a statement https://www.bot.or.th/English/PressandSpeeches/Press/2022/Pages/n3165.aspx after its policy meeting.
Given the clear economic recovery, an unchanged monetary policy will have to be withdrawn, otherwise, it will lead to overheating that will drive inflation higher, Assistant Governor Piti Disyatat told a news conference.
On the timing to raise rates, Piti said the BOT did not want to “raise (rates) too late”, or “a strong medicine” would be needed next year.
Raising its forecast for the economy and inflation this year, BOT said prices would remain elevated for longer than expected and that any rate hike would be made in line with the state of the economy and inflation.
The BOT’s monetary policy committee voted 4-3 to hold the one-day repurchase rate at 0.50%, where it has been since May 2020. The three members who opposed the decision had voted for a 25 basis-point hike. The split vote was the first since a meeting in August last year.[LUN2V2012]
All 20 economists in a Reuters poll had expected the central bank to keep rates on hold for now.
“Given the levels of uncertainty, we think the MPC would move in 3Q22, rather than our previous expectations of moving in 4Q22,” said Kobsidthi Silpachai, head of capital markets research of Kasikornbank.
Capital Economics said any pace of tightening would be gradual and forecast a 50 basis point hike this year, having previously expected rates to be left unchanged.
The BOT forecast economic growth of 3.3% for 2022, up from the previous forecast for 3.2% growth.
It now sees 2023 gross domestic product up 4.2%, compared with its earlier forecast of 4.4%.
The central bank forecast headline inflation of 6.2% in 2022, compared with 4.9% previously projected, and expected prices to peak in the third quarter before returning to its target range of 1-3% early next year.
For 2023, headline inflation was forecast at 2.5%, compared with 1.7% previously.
The BOT raised its forecast for foreign tourist arrivals for this year to 6 million, from 5.6 million previously. It predicts 19 million foreign tourist arrivals in 2023, matching its earlier estimate.
It raised its forecast for export growth in 2022 to 7.9% from 7.0% previously, and predicted export growth of 2.1% for 2023, compared with 1.5% previously.