Monetary Policy Committee’s Decision 3/2023

BOT Press Release No. 25/2023 | 31 May 2023

Mr. Piti Disyatat, Secretary of the Monetary Policy Committee (MPC), announced the outcome of the meeting on 31 May 2023 as follows.


The Committee voted unanimously to raise the policy rate by 0.25 percentage point from 1.75 to 2.00 percent, effective immediately.


The Thai economy should continue to expand, driven mainly by tourism and private consumption. Mechandise exports are expected to recover gradually. While headline inflation slows, core inflation remains elevated. Inflationary risks stem from greater demand pressures amid expanding economic activity and higher cost pass-through from supply pressures. The Committee deems a continuation of gradual policy normalization to be appropriate in light of the growth and inflation outlook, and voted to raise the policy rate by 0.25 percentage point at this meeting.


The Committee projects the economic growth to be 3.6 and 3.8 percent in 2023 and 2024, respectively. A key impetus is the broad-based recovery in tourism, which should promote employment and labor income, in turn sustaining private consumption. Merchandise exports are recovering broadly consistent with expectation, and should improve in line with a moderate expansion in the global economic activity. The Committee recognizes upside risks to domestic growth, in part owing to forthcoming government economic policies. At the same time, there is a need to monitor the uncertain economic and monetary policy outlook of major economies.


Inflation should continue to decline at a gradual pace. Headline inflation returned to the target range and is projected to be 2.5 and 2.4 percent in 2023 and 2024, respectively, due to easing electricity and oil prices. Moreover, core inflation is projected to stabilize at 2.0 percent in 2023 and 2024, an elevated level relative to the past. Upside inflationary risks exist from greater demand pressures amid expanding economic activity and higher cost pass-through from supply pressures, in part contingent on government economic policies looking ahead. As a result, there is a need to monitor the price-setting behavior of businesses.


The overall financial system remains resilient. Financial institutions maintain high levels of capital and loan loss provision. Debt serviceability of households and businesses has improved in tandem with the economic recovery. Nevertheless, financial fragilities remain for some SMEs and households that are exposed to rising living costs and higher debt burden. The Committee agrees that financial institutions should continue to press ahead with debt restructing and deems it important to have in place targeted measures and sustainable debt resolution for vulnerable groups.


Overall financial conditions turned somewhat less accommodative owing to higher private sector funding cost consistent with the policy interest rate. Current financial conditions nonetheless remain supportive of the ongoing recovery and mobilization of funds by the private sector. The baht depreciated against the US dollar, in part influenced by the Federal Reserve’s monetary policy outlook, the renminbi depreciation and domestic political uncertainties. The Committee is closely monitoring financial market developments and volatilities.


Under the prevailing monetary policy framework, the Committee seeks to maintain price stability, support sustainable growth in line with potential, and preserve financial stability. In the view of these objectives, the Committee expects a steady economic expansion but sees a need to monitor upside risks to inflation. The Committee thus decided to increase the policy interest rate to normalize the monetary policy stance in a gradual and measured manner toward a level consistent with long-term sustainable growth. The Committee is prepared to adjust the size and timing of policy normalization should the evolving growth and inflation outlook differ from the current assessment.


Bank of Thailand

31 May 2023

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