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Thai cenbank sees no need to tighten if inflation rises on supply-side shocks


Selasa, 07 Januari 2020 / 15:31 WIB
Thai cenbank sees no need to tighten if inflation rises on supply-side shocks
ILUSTRASI. A Thailand Baht note is seen in this illustration photo June 1, 2017. Thailand's central bank sees no need to raise its benchmark rate if inflation accelerates on supply-side shocks.

Sumber: Reuters | Editor: Wahyu Rahmawati

KONTAN.CO.ID - BANGKOK. Thailand's central bank sees no need to raise its benchmark rate if inflation accelerates on supply-side shocks, but regards the economy as still fragile, the governor said on Tuesday.

The central bank (BOT) last month left its key interest rate unchanged at a record low of 1.25%, but slashed forecasts for growth in Southeast Asia's second-largest economy and inflation for 2019 and 2020.

"We will look at the causes of inflation changes. If they are supply-side shocks, there is no need to rush to raise rates," Governor Veerathai Santiprabhob told reporters and analysts.

The bank forecasts headline inflation of 0.8% this year, below its 1-3% target range. But analysts fear inflation might spike if oil prices surge amid Iran-U.S. tensions.

The benchmark rate was cut twice in 2019, as policymakers tried to support growth and curb a climbing baht, which surged nearly 9% last year as Asia's top performing currency.

The baht hit 29.91 per U.S. dollar at the year-end, its highest level in more than six years, driven by hefty current account surpluses and foreign fund inflows.

Read Also: Thailand holds key rate, cuts economic forecasts as exports stumble

However, Veerathai said that the baht was no safe haven for foreign fund parking now because of Thailand's economic slowdown and that analysts expected the currency to weaken.

Still, the BOT reiterates that the monetary policy committee is concerned about the strength of the baht and suggests close monitoring and further relaxation of rules to spur fund outflows, according to Assistant Governor Titanun Mallikamas.

The MPC stands ready to use policy tools as appropriate, Titanun said.

Veerathai said he expected only a limited impact of drought on growth, which the BOT predicts at 2.8% this year.

High household debt levels remain a worry while it is ready to review loan to value rules if they are seen as too harsh, he said, without elaborating.




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