Monetary Policy Committee’s Decision 6/2022

​Mr. Piti Disyatat, Secretary of the Monetary Policy Committee (MPC), announced the outcome of the meeting on 30 November 2022 as follows.

The Committee votes unanimously to raise the policy rate by 0.25 percentage point from 1.00 to 1.25 percent, effective immediately.

The Thai economic recovery has continued to gain traction. Tourism and private consumption will continue to be key economic drivers going forward and help alleviate the impact of global slowdown on the Thai economy. Headline inflation is expected to be higher than the previous projection for 2023 due to domestic energy prices. However, it is still expected to decline and return to the target range within 2023. The Committee deems that a gradual policy normalization remains an appropriate course for monetary policy given the growth and inflation outlook, and thus votes to raise the policy rate by 0.25 percentage point at this meeting.

The Thai economy is projected to continue growing at 3.2 percent in 2022, 3.7 percent in 2023, and 3.9 percent in 2024. The tourism sector continues to strengthen as the number of foreign tourists continues to rise. Additionally, private consumption is supported by improving economic activities, as well as a more broad-based recovery in employment and labor income. The trajectory of Thai economic growth remains largely unchanged in 2023 and 2024 as the strength of the tourism sector and private consumption will help lessen the impact of the global slowdown on the Thai export sector. Nonetheless, the Committee will monitor the downside risks to the highly uncertain global economic outlook as well as the momentum of the tourism sector.

Headline inflation is expected to be at 6.3 percent in 2022, peaking in the third quarter, before declining to 3.0 percent in 2023 and 2.1 percent in 2024. Headline inflation is expected to be higher than previously assessed for 2023 on the back of the upward adjustment of electricity charges, but it is expected to return to the target range by the end of 2023. Core inflation projection is close to the previous assessment at 2.6 percent in 2022, 2.5 percent in 2023, and 2.0 percent in 2024. Meanwhile, medium-term inflation expectations remain anchored within the target range. However, the Committee will continue to closely monitor risks to inflation, especially a potential increase in cost pass-through as well as domestic energy prices which remain uncertain.

Overall financial system remains resilient. Commercial banks maintain high levels of capital and loan loss provision. Debt serviceability of households and businesses has improved in line with the economic recovery. However, the financial positions of some SMEs and households remain fragile and sensitive to the rising living costs and debt burden as incomes have yet to fully recover. The Committee views that financial institutions should continue to press ahead with debt restructuring and deems it important to have targeted measures and sustainable solutions in place for vulnerable groups.

Overall financial conditions remain accommodative. Funding costs in the private sector gradually rise in tandem with the policy rate but remain conducive for business financing, with credit and funding in the bond market still seeing growth. The baht against the US dollar has been highly volatile owing mainly to expectations surrounding the monetary and macroeconomic policy in major economies. The Committee will continue to closely monitor developments in the financial market and volatilities in the foreign exchange market.

Under the monetary policy framework with objectives of maintaining price stability, supporting sustainable and full-potential economic growth, and preserving financial stability, the Committee judges that the Thai economic recovery will be on track, albeit with risks to inflation. The policy rate should be normalized to the level that is consistent with sustainable growth in the long term in a gradual and measured manner. Given the heightened uncertainties surrounding the global economy, the Committee is ready to adjust the size and timing of policy normalization should the growth and inflation outlook shift from the current assessment.

Bank of Thailand
30 November 2022