Thai rate hikes shouldn’t be too late as inflation climbs, says chief

  • Any rate hike shouldn’t be too late – Governor
  • Inflation above target this year, peaking in Q3
  • has kept its key rate at a record low of 0.5% since May 2020
  • Economists expect rate hike at next meeting in August

BANGKOK, June 13 (Reuters) – Thailand’s central bank governor said on Monday delaying rate hikes too long would not be good for the country as inflation continues to climb, in remarks that prompted economists to predict an imminent rate hike.

Inflation is expected to exceed the central bank’s target range of 1-3% this year and is expected to peak at 7.5% in the third quarter, Bank of Thailand Governor Sethaput Suthiwartnarueput said at a seminar in business and journalists. Read more

But any rise will be gradual as concerns remain about a recovery in the vital tourism sector, he said. Sethaput did not specify when and by how much rates would be increased.

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Policy tightening should not be done too late to avoid large increases, he added.

“It’s not holding the economy back,” he told the seminar, adding that there was less need for very accommodative monetary policy as the economy clearly recovered.

The return of Southeast Asia’s second-largest economy to pre-pandemic levels, however, would be late this year or early 2023, lagging other countries, he said.

Last week, the central bank left its key interest rate (THCBIR=ECI) unchanged at a record low of 0.5%. But in a 4-3 vote, the three dissenters favored a quarter-point hike, citing heightened upside risks to growth and inflation. Read more

The BOT will then revise its policy in August, when economists expect a rate hike. Read more

Last week, the BOT raised its economic growth forecast for 2022 to 3.3% from 3.2% and sharply raised its inflation outlook to 6.2% from 4.9% previously. Read more

The economy is not expected to face an economic crisis, just high inflation, Sethaput said, adding that external stability was good and capital flows were not yet a concern.

A weak baht at its lowest level in five years against the dollar did not accelerate inflation much, he said, adding that the BOT would not be complacent and would be watching closely.

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Reporting by Orathai Sriring and Kitiphong Thaichareon and Satawasin Staporncharnchai; Editing by Martin Petty

Our standards: The Thomson Reuters Trust Principles.

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