BANGKOK- Thailand will only gradually increase interest rates to tackle rising inflation and ensure an uninterrupted economic recovery, while the central bank will let the baht move in line with market forces, the central bank chief said on Monday.
The recovery of Southeast Asia’s second-largest economy is slow but intact, helped by improved consumption, Bank of Thailand Governor SethaputSuthiwartnarueput told a central bank seminar.
The economy is expected to return to its pre-pandemic levels in the first quarter of next year, lagging other regional countries, he said, noting there were good signs in the vital tourism sector that might see foreign tourist numbers beating the BOT’s forecast of 6 million this year.
There were nearly 40 million foreign tourists in pre-pandemic 2019.
The BOT’s challenge is how to keep the recovery going and uninterrupted, Sethaput said.
“It’s a matter of smooth take-off. So, any monetary policy action must be done gradually,” he said.
Raising interest rates when necessary was a tool to tackle inflation, he said.
Economists expect the BOT to raise the key policy rate from a record low 0.50 percent at the next meeting on Aug.
With inflation hitting a near 14-year high, the BOT has the duty to anchor inflation expectations, which started to rise in the short term, Sethaput said, adding long-term inflation expectations remained anchored, however.
A weak baht had been driven by external factors, particularly a strong dollar, but its weakness is still in line with regional currencies, while capital movements remain normal, Sethaput said.
The central bank will let the baht move with market forces but will take action on any excessive volatility, he said.
