Bank of Thailand’s Governor Sethaput Suthiwartnarueput forecasts that inflation will remain within the 1% to 3% target band over the next two years, characterizing this range as appropriate for promoting the country’s growth potential.
The governor emphasized the enduring effectiveness of the inflation target, maintained for five consecutive years, in stabilizing medium-term inflation expectations, as it offers enough adaptability to manage inflation fluctuations spurred by external and supply-side shocks. This statement came shortly after the Cabinet sanctioned the monetary policy target for 2025.
Meanwhile, despite Thailand’s inflation falling below the target for the sixth consecutive month to 0.95% in November, the central bank opted to keep its key interest rate at 2.25% as of December 18, following an unexpected rate cut in October.
The central bank chief remarked that while average headline inflation for 2025 and 2026 is expected to stay within the target, temporary deviations could occur due to economic disturbances.
In a collaborative move, the BOT and the Ministry of Finance will engage in regular discussions to align fiscal and monetary policies. Sethaput highlighted that the Minister of Finance and the Monetary Policy Committee (MPC) might, through mutual understanding, adjust the monetary policy target if necessary and present the revised target to the Cabinet for approval.
The central bank aims to foster sustainable economic growth and financial stability, with efforts directed at setting an appropriate policy interest rate and using additional measures to mitigate exchange rate volatility.
Amidst this ongoing dialogue, there are no firm commitments to achieving a 2% inflation midpoint target, a goal advocated by Finance Minister Pichai Chunhavajira.
Should inflation deviate outside the target band based on past or forecast data, the MPC would draft an open letter to the finance minister detailing the breach’s causes, past monetary actions, and future strategies to realign inflation with targets.
Still, the Finance Minister continued to reiterate his appeal for a policy interest rate cut to spur Thailand’s inflation and emphasized the need for the MPC to announce another rate reduction to address the persistently low inflation rate, adding that the ministry has consistently offered economic data and engaged in comprehensive discussions with the BOT.
