Bank of Thailand keeps key rate unchanged at 0.5%

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The Monetary Policy Committee (MPC) voted 4 to 3 to keep the key rate at 0.50%. Three members voted to raise the policy rate by 0.25 percentage points.

The Bank of Thailand kept its key rate unchanged at 0.5%, amid mounting pressure from rising prices and monetary policy tightening from its peers.

The Committee estimated that Thailand’s economy will continue to recover and may grow faster than expected due to stronger domestic demand and an increase in the number of foreign tourists.

Headline inflation projected at 6.2%

Headline inflation is projected at 6.2% in 2022 and 2.5% in 2023. Inflation will rise above the upper end of the target range in 2022 due to rising domestic energy prices and the higher pass-through of costs that have expanded to broader product lines.

The split in the Monetary Policy Committee’s vote (4 to 3) underscores the recent resurgence of inflation, which hit a 14-year high of 7.1% in May.

The Monetary Policy Committee’s projection for this year is that the country’s inflation will reach 6.2%, which is higher than the previous forecast of 4.9%.

However, the Committee also assessed that the Thai economy will grow by 3.3% in 2022 and 4.2% in 2023 thanks to a better than expected recovery in domestic consumption, especially in the services sector. Foreign tourist arrivals have also improved following the faster relaxation of border controls in Thailand and other countries.

Foreign arrivals this year are expected to be 6 million, with the potential to increase to 19 million next year.

The global financial system remains resilient. Commercial banks have high levels of capital funds and loan loss provisions. The liquidity of the financial system remains abundant, even if the distribution of liquidity still varies from one economic sector to another. Some households and businesses remain vulnerable to rising costs of living and production as their incomes have not fully recovered on top of their high debt levels.

The Bank of Thailand will keep the brake on interest rates, even if other central banks start to tighten monetary policy, as long as inflation in Thailand remains contained in a small set of goods, its governor told Nikkei Asia in an exclusive interview.

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