Thai Economy Can “Look Through” Short-Term Volatility in Inflation, says BOT

Bank of Thailand pledged to maintain accommodative monetary policy to support economic recovery noting it can “look through” short-term volatility in inflation.

The Bank of Thailand on Monday said, “Inflation is accelerating as a result of supply-side factors.”

“In the current context, the monetary policy can look through the short-term volatility.”

The BOT said, the monetary policy committee will put more focus on aiding with measure for economic recovery, while policy makers will manage inflation expectations through better communication on factors contributing to price pressures
Even as consumer prices surged to the highest level in 13 years, the committee left left policy rate at record-low 0.5% in last month. Most economists expected policymakers to hold rates until next year.

The BOT also noted Thailand will see more price pressures through the second and third quarter of this year as a global oil supply squeeze is seen persisting. They noted the headline inflation will return to its target range of 1%-3% in early 2023.

“Our main goal is to oversee the demand-pull inflation, and there is still some slack in the economy such as high unemployment and weak tourism,” said Surach Tanboon, senior director for BOT’s monetary policy group.

“It’s a challenging time for BOT during this supply-shock inflation.”

Sakkapop Panyanukul, BOT’s senior director, said at the same briefing that the economy is facing short-term downside risk from constrains in the global supply-chain, higher living costs and the persistent local Covid-19 outbreak.

The bank has kept its economic growth forecast of 3.2% this year and 4.4% in 2023.

Surach added, Thailand may see narrower current account deficit this year once higher energy and freight costs subsides along with recovery in tourism sector in the second half of the year.