The Bank of Thailand (BOT) held a meeting of its monetary policy committee on January 25th, and decided to raise its policy interest rate from 1.25% to 1.50% by 0.25 percentage points. This marks the fourth consecutive meeting in which the policy interest rate has been raised, following meetings in August, September, and November 2022. The committee judged that a gradual increase in the policy interest rate is a suitable direction for monetary policy, and reached a unanimous decision to raise the policy interest rate by 0.25 percentage points.
According to the BOT's announcement, the Thai economy is expected to be driven by a recovery in tourism and personal consumption, which is being fueled by an increase in tourists from China. The recovery in tourism is expected to lead to increased income and employment in the service sector and to further boost personal consumption. On the other hand, while merchandise exports are expected to slow down, they are forecast to improve by 2024, thanks to the recovery of the global economy. Moreover, with the outlook for advanced economies and China improving, the risk of a downturn in the global economy is considered to be decreasing.
The headline inflation rate (overall inflation rate) is expected to decline. Due to the decline in energy prices and commodity prices around the world, inflationary pressure from the supply side is expected to continue to decrease. With regard to core inflation, it is expected to remain high for a while, but to gradually decline. The medium-term inflation forecast is fixed within the target range, but if cost pass-through increases, there is a possibility that core inflation will remain high for longer than expected, and the recovery in tourism could also lead to inflationary pressure from demand side. The committee will continue to closely monitor the situation.
In summary, the monetary policy committee judges that the Thai economy will continue to recover. The policy interest rate should be normalized to a level that is consistent with sustainable growth in the long term. The committee also states that it is prepared to adjust the scale and timing of policy normalization if the outlook for economic growth and inflation changes from its current assessment.