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Thailand’s monetary policies independent of moves by US Fed, BOT governor clarifies

MONDAY, OCTOBER 03, 2022

THE NATION

The Bank of Thailand (BOT) has ruled out pegging the baht’s value to the US dollar, and clarified that Thailand’s financial policies do not necessarily follow those of the United States as both countries have totally different economies.

BOT Governor Sethaput Suthiwartnarueput pointed out on Monday that the US Federal Reserve’s policy of raising interest rate frequently should not be applied to Thailand, as that would only make the baht stronger than other currencies in this region.

To combat inflation, the Fed has raised policy rate five times this year — from 0.25 to 3.25 per cent as of September 21.

Meanwhile, the BOT has raised the policy rate twice this year, once on August 10 from 0.50 to 0.75 per cent and by another 25 basis points on September 28 to 1 per cent.

Monetary Policy Committee (MPC) secretary Piti Disyatat said last week that the committee had voted to raise the policy rate because the Thai economy was still recovering, driven by the tourism sector and spending by the private sector, while inflation was still high.

The US Fed still has two meetings left this year — on November 2 and December 14 — at which the policy rate is expected to be further raised to 3.75 and then 4.25 per cent, respectively. The MPC has only one scheduled meeting left this year, on November 30.

Some experts have expressed concern that since the MPC has only one chance left to adjust the rate this year while the US has two, Thailand would eventually be unable to adjust its policy in accordance with the US’s new rate. To this, Sethaput responded: “If the situation does change, we could hold an extraordinary meeting of the MPC to adjust our rate accordingly. There is no law barring an additional meeting of the MPC.”

“Besides, the global markets are already accustomed to the Fed’s policy trend this year, therefore the impact from its future rate adjustment should be minimal,” he added.

Sethaput added that Thailand’s economy is in the recovery phase after the pandemic and is expected to bounce back to pre-Covid level by early next year.

“The BOT will ensure a smooth takeoff for our economic recovery and is keeping an eye out for factors that could hinder this endeavour, especially the rising inflation rate and lack of continued support from financial institutions to business operators.

THE NATION