Central bank focuses on growth ahead of rate review


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The Bank of Thailand is focused on helping economic growth amid subdued inflation and less worried about the US Federal Reserve’s monetary actions, BoT Governor Sethaput Suthiwartnarueput said ahead of the meeting of bank rate next week.

“Most of our rate path will be dictated by national considerations,” Sethaput said, adding that inflation, growth and financial system stability will be the central bank’s main concerns.

“It will be less dictated by what happens in terms of Fed responses and a decline sooner than expected,” Sethaput said in an interview with Kathleen Hays, Rishaad Salamat and David Ingles of Bloomberg Television.

“We are a country that is not that vulnerable to a faster Fed cut.” While the Bank of Thailand sees an “increase” in its growth estimate of 0.7% this year, the outlook for 2022 – when the monetary authority predicts a 3.9% expansion – is fraught with uncertainty, a declared Sethaput.

The forecast will be reviewed at the rate meeting on December 22. Thailand’s economy is expected to be the worst performing in Southeast Asia this year, under pressure from weak local demand and tourist arrivals.

The omicron variant adds more risk to the nascent economic recovery, and the discovery of new variants in the future could impact growth estimates as it could derail expected tourist arrivals, he said.

The government has put in place two borrowing programs worth 1.5 trillion baht ($ 44.9 billion) in 2020 and 2021 to combat the economic fallout from the pandemic, while the central bank has cut back its key interest rate at an all-time high of 0.5%, which it has kept for the past 12 meetings.

The central bank and the finance ministry both said the economy hit a low in the July-September quarter, when new Covid cases peaked at more than 20,000 a day. The seven-day average of new infections has declined steadily since August, to around 3,900 now.

At least 69% of the Thai population has received at least one dose. Target-baht-free inflation accelerated to 2.71% in November, the fastest pace since April, due to higher prices for oil and vegetables. The government has subsidized the prices of diesel and cooking gas to ease the burden on the public, but the central bank expects the price gains to remain near the lower end of the target range of 1-3% this year and next year.

While headline inflation may see a further rise in the coming months, it “may not be sustainable or permanent,” Sethaput said. With limited pass-through of energy costs with the government subsidizing fuels and its relatively smaller share in the CPI basket, the central bank will remain focused on measures to stimulate growth and tackle debt. high household, he said.

The weak baht is also pushing up oil prices for Thailand, a net importer. The baht has weakened more than 10% against the dollar since the start of the year, the worst performance among major Asian currencies tracked by Bloomberg.

The central bank is not aiming for a “preset level” for the baht and the currency is determined by fundamentals, Sethaput said. The monetary authority will ensure that the currency is not too volatile to hurt economic recovery, he said.

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