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Thailand Monetary Policy December 2018

Thailand: Bank of Thailand raises rates for the first time in seven years in December

Following the increasing hawkishness of the Monetary Policy Committee of the Bank of Thailand since August, the committee raised the policy rate by 25 basis points to 1.75% from 1.50% at its meeting on 19 December. Although two of the seven members voted to stand pat, the decision was in line with the clear majority of FocusEconomics Consensus Forecast panelists.

The decision to raise rates was taken in light of the Bank’s broadly unchanged assessment of the inflation outlook, and an economy that “continued to gain traction on the back of domestic demand”. This reduced the need for such accommodative monetary policy in the eyes of the majority of the committee. The decision was also taken to stem the build-up of financial instability and to create policy space. On the other hand, the two dissenting committee members considered that macroprudential measures had “addressed certain risks in the financial stability to some extent” and that heightened external risks could negatively affect the economy.

In its press release, the Bank of Thailand struck a somewhat similar tone compared to its previous meetings and stated that “the Committee viewed that accommodative monetary policy would remain appropriate in the period ahead”. However, unlike at the previous meeting, the BoT did not explicitly hint at further rate hikes going forward. Instead, the Bank pledged to “closely monitor developments of economic growth, inflation, and financial stability, together with associated risks” when deciding future monetary policy.

The next monetary policy meeting is scheduled for 6 February.

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