The monetary policy decision-making process
The MPC sets monetary policy that is consistent with domestic economic conditions to ensure price stability and sustainable economic growth. In addition, the MPC plays an important role in determining guidelines for exchange rate policy that is consistent with the monetary policy stance.
Approximately every 6 weeks (8 times a year), the MPC meets to assess the economic and financial conditions as well as the risk factors that may affect future inflation and economic growth in its consideration of the monetary policy direction. In each meeting, the MPC Secretariat presents the latest economic data on financial market conditions, fiscal position, international financial environment, and production, as well as other factors that may affect the price level, including world commodity prices and US interest rates. The plausible trends of these variables are widely discussed and subsequently incorporated into the inflation and GDP forecasts.
Given the forward-looking nature of monetary policy, and given the time lags before monetary policy takes effect, monetary policy needs to be pre-emptive and forward-looking. Monetary policy therefore relies on a number of instruments, namely (1) the Bank of Thailand’s Macroeconomic model, which is used make forecasts of relevant economic variables, (2) assumptions regarding external factors not determined endogenously within the economy, such as expectations of oil prices or growth of trading partners’ GDP, for instance, which would help in making such forecasts.
The MPC takes these factors into consideration in their monetary policy decision. At 14.00 hours on the day of the meeting, the Secretary to the MPC holds a press conference where a written statement is released, and the Secretary is available to answer questions. At the same time, and going forward until the next meeting, the Bank of Thailand undertakes open market operations to ensure that the policy rate is held - as close as possible - to the level determined by the MPC.
Each quarter, the Bank of Thailand publishes a quarterly Monetary Policy Report to present the latest economic and inflation forecasts to the MPC in a clear and forward looking manner, as well as communicate to the general public views of the MPC to in reaching their various policy decisions.