Bank of Thailand raises key policy rate to 3 year-high of 1.5%

  • The Bank of Thailand on Wednesday raised its key interest rate for the fourth consecutive time by 25 basis points to 1.5%, the highest since Sep 19, maintaining a tight monetary policy to keep inflation in check at a time when the economy is still recovering from the COVID pandemic.
  • Although headline inflation in the kingdom slipped to 5.89% in Dec 22 from a peak of 7.86% in Aug 22, it was still well above the central bank’s target range of 1% to 3%.
  • The Monetary Policy Committee deems that a continuing gradual policy normalization is an appropriate course for monetary policy, consistent with the growth and inflation outlook.
  • The central bank would gradually raise the key interest rate until the average inflation drops to the target range, noting that it could be by the end of 2023. Although the central bank did not share its latest forecast on inflation and economic growth.
  • The Thai economy is heavily dependent on tourism and in particular, Chinese arrivals. Now that China has reopened, the Tourism Authority of Thailand is expecting 4 mn from the country and a total of 25 mn arrivals in 2023. Which is still well below the 39 mn tourists who came to Thailand in 2019.

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