BANGKOK- Thailand will gradually raise interest rates to curb higher inflation and ensure no disruption to an uneven post-pandemic economic recovery, its central bank governor said, ruling out an off-cycle policy meeting for now.
While the recovery is clearer and should be intact, it is still not broad-based, with the export sector performing better than pre-pandemic levels, while tourism remains low, although recovering faster than expected, governor Sethaput Suthiwartnarueput said.
Raising rates would help anchor inflation expectations, he told a news conference, adding there was no need for a special rate meeting ahead of the scheduled Aug. 10 policy meeting, as factors to watch remained within forecasts.
The Bank of Thailand is expected to raise its key interest rate from a record low of 0.50 percent at the next meeting, which would be the first hike since late 2018.
Inflation is expected to peak in the third quarter, averaging at 7.5 percent, above the BOT’s target range of 1-3 percent, and the BOT will prevent it from rising steadily, he said.
“Our challenge is how to make the takeoff smooth,” he said. “If we can’t control inflation and it keeps rising, it will prevent the continuation of the recovery,” Sethaput said.
The inflation impact is seven times that of rate hikes, he said, adding inflation would undermine purchasing power.
In June, the BOT predicted economic growth of 3.3 percent this year and 4.2 percent for 2023. It saw headline inflation at 6.2 percent this year and 2.5 percent in 2023.
