Thailand will increase interest rates in order to bring inflation back to normal and ensure a continued recovery, the central bank chief said on Thursday, playing down the impact of a weak baht on the overall economy.
The Bank of Thailand BOT was ready to adjust the pace of tightening monetary policy and hold an off-cycle meeting if necessary, Sethaput Suthiwartnarueput told reporters.
He said if we need to hike more than 25 bps basis points, such as 50 bps, we're ready to do it.
Sethaput said that aggressive rate increases were not suitable for Thailand's economy, which is still in recovery.
The BOT did not need to match moves by the U.S. Federal Reserve, because he said that raising rates too fast would disrupt the recovery and we won't get as smooth as we want it to be.
On Wednesday, the BOT raised its key interest rate by a quarter point to 1.00 per cent to curb inflation and said policy mornalisation should be done in a gradual and measured way. The BOT will review rates on November 30, when most economists expect a quarter point rise.
The BOT sees economic growth of 3.3 per cent this year and 3.8 per cent for 2023. The growth of 1.5 per cent last year was among the slowest in Southeast Asia.
The BOT will use rates to bring inflation to its target range of 1 -- 3 per cent, but it has no target level for rates, Sethaput said.
He said that the core rate should peak during the fourth quarter of 2022, at a 14 year high of 7.86 per cent in August.
The headline inflation of the BOT will be 6.3 per cent this year and 2.6 per cent next year, with the core rate seen at 2.6 per cent and 2.4 per cent, respectively.
Sethaput said a weak baht was driven by dollar strength and was not unusually weak and in line with regional peers, but the BOT was ready to act on excessive moves.
Even with the baht trading at a 16 year low, the governor said that it had not significantly impacted the overall economy.
Capital outflows were not a concern yet, and Thailand's external stability remained strong, he said.