BOT governor says rate hikes will be gradual, shrugs off weak baht

  • Thailand will gradually raise interest rates to bring inflation back to target and ensure a continued recovery, the central bank chief said on 29 Sep 22, playing down the impact of a weak baht on the overall economy.
  • However, the Bank of Thailand (BOT) is ready to adjust the pace of tightening monetary policy and hold an off-cycle meeting if necessary, Sethaput Suthiwartnarueput told reporters.
  • “If we need to pause, we’ll pause. If we need to hike more than 25 bps (basis points), such as 50 bps, we’re ready to do it,” he said.
  • But aggressive rate increases were not suitable for Thailand’s economy, which is still in recovery, Sethaput said.
  • Raising rates too fast would disrupt the recovery and “we won’t get as smooth a takeoff as we want”, he said, adding the BOT did not need to match moves by the U.S. Federal Reserve.
  • On 28 Sep 22, the BOT raised its key interest rate by a quarter point to 1.00% to curb inflation, and said policy mornalisation should be done in a “gradual and measured manner”.
  • The BOT will review rates on 30 Nov 22, when most economists expect another quarter point rise.
  • Sethaput also said a weak baht was being driven by dollar strength and is in line with regional peers, but added that the BOT is ready to act on excessive moves.
  • Even with the baht trading at a 16-year low, the governor said it had not significantly affected the overall economy.
  • Capital outflows were not a worry yet and Thailand’s external stability remained strong, he said.

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