The Bank of Thailand raised the benchmark policy rate for the first time in more than three years. This signalling it would stick with measured moves going forward to fight inflation without derailing the economy’s recovery.
On Wednesday, the bank’s monetary policy committee decided to increase the one-day repurchase rate by 25 basis points to 0.75%, as forecast by 24 of 27 economists in a Bloomberg survey. The remaining three had predicted a 50-basis-point hike. The rate was last increased in December 2018.
According to the Bank of Thailand, the policy rate should be normalized to a level that is consistent with sustainable growth. “Normalizing monetary policy should be gradually and measuredly following growth and inflation outlooks.”
Last month’s headline inflation rate of 7.61% was slightly lower than June’s 7.66%, but it still exceeded the central bank’s 1%-3% target. Core prices rose almost 3% in July, up from 2.51% in June, excluding volatile food and fuel items.
As far as inflation is concerned, it will remain high throughout 2022, largely unchanged from the previous forecast. The Central Bank said it will slowly decline into the target range in 2023 without providing any details.