Monetary Policy Committee’s Decision 3/2022

Press Release No. 31/2022 | 08 Jun 2022 999 minutes read

Monetary Policy Committee’s Decision 3/2022

Mr Piti Disyatat, Secretary of the Monetary Policy Committee (MPC), announced the outcome of the meeting on 8 June 2022 as follows.


The Committee voted 4 to 3 to maintain the policy rate at 0.50 percent. Three members voted to raise the policy rate by 0.25 percentage point.


The Committee assesses that the Thai economy will continue to recover and could expand faster than previously expected owing to stronger domestic demand and the pickup in foreign tourists. Headline inflation would increase and remain elevated for longer than previously estimated, due to the increase in oil prices and higher cost passthrough. The Committee deems that a very accommodative monetary policy will be less needed going forward. However, to ensure that the recovery will continue to gain traction as anticipated, most members voted to maintain the policy rate in this meeting and will reassess the risks to growth and inflation going forward. Meanwhile, three members view that policy normalization is warranted in this meeting given the increased upside risks to both growth and inflation. 


The Committee assesses that the Thai economy will expand at 3.3 percent in 2022 and 4.2 percent in 2023 on the back of better-than-expected recovery in domestic consumption, especially in the services sector. Foreign tourist arrivals also improve following the faster relaxation of border controls in Thailand and other countries. Furthermore, the labor market and household income show signs of improvement as economic activities continue to expand in tandem with the relaxation of containment measures. Meanwhile, the impact of COVID-19 and the conflict between Russia and Ukraine on the Thai economy will be limited. However, the Committee will monitor key risk factors to economic recovery, especially the impact of higher prices on living costs for households.


Headline inflation is projected to be at 6.2 percent in 2022 and 2.5 percent in 2023. Inflation will exceed the upper bound of the target range in 2022 due to increasing domestic energy prices and higher cost passthrough that have broadened into wider ranges of products. The rise in inflation has been mainly due to cost-push factors while medium-term inflation expectations remain anchored within the target range. Nonetheless, inflation risks increase significantly from uncertainties surrounding global energy prices, the possibilities of broader and faster cost passthrough, and rising demand-side inflationary pressure as the economic recovery gains strength. The Committee would closely monitor inflation dynamics, cost passthrough, and medium-term inflation expectations.


Overall financial system remains resilient. Commercial banks have high levels of capital fund and loan loss provision. Liquidity in the financial system remains ample, although liquidity distribution still varies across economic sectors. Some households and businesses remain vulnerable to rising living and production costs as their incomes have not fully recovered in addition to their high levels of debt. The Committee views that financial institutions should continue with debt restructuring in a sustainable manner to have broader impacts and be consistent with borrowers’ long-term debt serviceability, especially with a focus on targeted measures for vulnerable groups.


Overall financial conditions remain accommodative albeit volatilities increase in financial markets. On exchange rates, the baht has depreciated relative to the US dollar in line with regional currencies. Long-term government bond yields rose in tandem with the monetary policy outlook in advanced economies and the expectation of domestic monetary policy normalization in the period ahead. The Committee will closely monitor developments and volatilities in financial markets.


Under the monetary policy framework with objectives of maintaining price stability, supporting sustainable and full-potential economic growth, and preserving financial stability, the Committee assesses that the economic recovery has continued to gain more traction, while the upside inflationary risks continued to increase. Thus, the Committee deems that a very accommodative monetary policy will be less needed going forward. The Committee will assess the appropriate timing for a gradual policy normalization in accordance with the shift in the outlook and risks surrounding growth and inflation.


Bank of Thailand

8 June 2022


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