Monetary Policy Committee’s Decision 1/2022

Mr. Piti Disyatat, Secretary of the Monetary Policy Committee (MPC), announced the outcome of the meeting on 9 February 2022 as follows.

The Committee voted unanimously to maintain the policy rate at 0.50 percent.

The Committee assessed that the Thai economy would continue to recover, as the Omicron variant would exert limited pressure on the public health system. Downside risk to growth improved. However, there remained a need to closely monitor developments of the pandemic going forward. Upside inflationary risks increased, and headline inflation would accelerate in early 2022 owing to the rises in energy and raw food prices. While demand-side inflationary pressures remained subdued in line with the gradual recovery of household income, there remained a need to monitor global energy prices and broad-based cost pass-through to goods and services. The Committee viewed that the continued accommodative monetary policy would help support economic growth, and thus voted to maintain the policy rate. In addition, the ongoing financial and fiscal measures, with the focus on rebuilding and enhancing potential growth, would play an important part in bolstering the robust recovery of the labor market as well as the income of businesses and households.

The Committee assessed that the Thai economy in 2021 would expand faster than previously projected, and the recovery would continue into 2022 driven by higher merchandise exports, as well as a higher number of foreign tourist arrivals due to faster-than-expected relaxation of travel restrictions. However, the recovery would remain fragile and uneven across sectors, especially in tourism which was below pre-pandemic levels. The Committee would monitor developments of the labor market as well as the impact of higher living costs given that income had not fully recovered. 

Headline inflation in 2022 would be higher than previously assessed and could exceed the target range in the early part of the year. This would be owing to price increases in certain sectors, especially energy and raw food products. Meanwhile, upside risks to inflation increased. In particular, cost pass-through from producers to consumer prices could increase if energy and raw food prices remain elevated for longer than expected, or if the supply constraint problems broaden into other goods. Nevertheless, the average inflation rate for the full year 2022 and medium-term inflation expectations would remain within the target range. Furthermore, there had not been an indication of broad-based increases in the prices of goods and services, while demand-side inflationary pressures remained subdued. In the period ahead, there remained a need to closely monitor developments of global energy prices and domestic goods and services prices, as well as the possibility of growing wage pressures. 

Overall liquidity remained ample, but liquidity distribution still varied across economic sectors. Long-term Thai government bond yields rose primarily in tandem with US Treasury yields. On exchange rates, the baht relative to the US dollar still exhibited volatile movements due to faster monetary policy normalization in advanced economies and the easing of domestic outbreak containment measures. The Committee would closely monitor developments in both global and domestic financial markets, and continue to expedite the new foreign exchange ecosystem, particularly through supporting SMEs in hedging against risks from exchange rate volatility.

The Committee viewed that the government measures and policy coordination among government agencies would be critical to support the economic recovery. Public health measures should strike a balance between containing the outbreak and supporting the recovery of economic activities. Fiscal measures should support the economic recovery in a targeted manner, with a focus on generating income and expediting measures to rebuild and enhance potential growth. Monetary policy should contribute to continued accommodative financial conditions overall. Financial and credit measures helped distribute liquidity to the affected groups in a targeted manner and reduce debt burden. These measures included the special loan facility, asset warehousing scheme, and other measures by specialized financial institutions (SFIs). In addition, financial institutions should accelerate debt consolidation and debt restructuring in a sustainable manner through the scheme launched on September 3, 2021 to have broader impacts and be consistent with borrowers' long-term debt serviceability.

Under the monetary policy framework with objectives of maintaining price stability, supporting sustainable and full-potential economic growth, and preserving financial stability, the Committee continued to put emphasis on supporting the economic recovery. The Committee would closely monitor key factors affecting the economic outlook, namely, developments of the COVID-19 outbreak, global energy prices, higher cost pass-through, as well as the adequacy of fiscal, financial, and credit measures. The Committee would stand ready to use appropriate monetary policy tools if necessary.

Bank of Thailand
9 February 2022

For further information, please contact: Monetary Policy Strategy Office
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