THAILAND’S central bank is comfortable with the outlook for subdued inflation as it focuses the monetary policy to ensure financial stability and economic growth amid rising uncertainties, a senior official said.
“Inflation is not even a problem,” Bank of Thailand (BOT) assistant governor Sakkapop Panyanukul said on Wednesday (Jan 8) in Bangkok in his first interview with a foreign media. The low level of price growth does not “obstruct” the nation’s economic recovery, he added.
Adopting a government suggestion to target inflation at 2 per cent instead of maintaining a 1 to 3 per cent target band may be “inappropriate”, Sakkapop said, as prices in Thailand are largely influenced by external factors. Sakkapop, 47, was promoted to lead BOT’s monetary policy group in October and also serves as the secretary of the Monetary Policy Committee.
BOT and the government have clashed over strategies to jump-start South-east Asia’s second-largest economy after a decade of lacklustre growth. The central bank continues to fend off calls from the finance minister and other top officials to deliver more rate cuts and steps to boost inflation.
The central bank last month kept the benchmark rate steady at 2.25 per cent after a surprise quarter-point reduction in October.
Maintaining a target band for inflation will provide BOT much-needed flexibility and ensure policy credibility and effectiveness, the assistant governor said. Consumer prices are expected to stay around 1 per cent for most of 2025 with the possibility of a dip below the target range in the third quarter, Sakkapop said.
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Headline inflation, which lingered below 1 per cent for most of 2024, returned to the central bank’s 1 to 3 per cent target range in December for the first time in seven months.
The BOT sees price gains averaging 1.1 per cent in 2025 compared with 0.4 per cent in 2024. It expects gross domestic product growth to gain momentum to 2.9 per cent from an estimated 2.7 per cent expansion in 2024. Last year’s economic performance will be reported mid-February and the first rate meeting this year will be on Feb 26.
The monetary policy needs to be “robust” to cope with rising global uncertainties, including the impact of incoming US president Donald Trump’s broad tariff threats, according to Sakkapop. The central bank will try to avoid “overreacting” to data and will focus on analysing trends, he said.
Trump’s policies
The BOT will also conduct more scenarios-based analysis and will communicate the effect of Trump’s policies once they become clearer, Sakkapop said.
The central bank will utilise a range of tools, including foreign-currency intervention and macro prudential measures as needed, and avoid “overburdening” the policy rate, he said.
“Our rate at 2.25 per cent is not that high,” Sakkapop said, adding that Thailand’s borrowing cost is among the lowest in the world.
“Preserving our policy space is important as we don’t know how deep the situation will be in the future,” the assistant governor said. BLOOMBERG
