MPC Raises Policy Interest Rate to 2.25% to Tackle Rising Inflation
August 2, 2023
In a unanimous decision, the Monetary Policy Committee (MPC) has announced an increase in the policy interest rate to 2.25%, effective immediately. This move is aimed at addressing high levels of inflation and ensuring long-term economic and financial stability.
The decision was revealed by Mr. Piti Disyathat, Secretary of the MPC, who emphasized the committee’s commitment to maintaining inflation within the target range. The raise in the interest rate is seen as a necessary step in countering the risks looming over the economy, particularly given the uncertain global economic recovery and the volatility of the government’s economic policies.
The Thai economy, heavily reliant on the tourism sector and private consumption, has experienced some setbacks due to the slow recovery of the Chinese economy and the sluggish global electronic cycle. However, there is optimism that these sectors will gradually rebound along with the overall global economic recovery, despite the persisting political uncertainties.
While the inflation rate has shown a decline in the energy category, various factors such as cost-of-living support measures and the high base effect from previous years have contributed to the sustained high core inflation. Monitoring the risk of rising food costs remains crucial, especially if the El Niño phenomenon persists longer than anticipated.
Although the general financial situation has improved, private funding has not been hindered. The increase in business borrowing costs has been in line with the policy interest rate hike, with the business sector successfully raising funds through debt securities. Additionally, the recent slowdown in private credit can be attributed to a necessary adjustment to a more normalized level after an expansion during the COVID-19 crisis. The exchange rate of the Thai baht against the US dollar has experienced fluctuations, guided by the monetary policy directions of the US Federal Reserve and the Chinese economic forecast, along with concerns over the political instability in Thailand.
The MPC unanimously raised the policy rate by 0.25% to 2.25%, looking at the interest rate suitable for high inflation. is used as a financial tool to ease the uncertainty of risks to the economy in the future as well
Today (August 2, 2023), Mr. Piti Disyathat, Secretary of the Monetary Policy Committee (MPC), that the MPC meeting decided unanimously to raise the policy interest rate to 0.25% per annum from 2.00% to 2.25% per annum, effective immediately, with the CRC being consider that an interest rate rise is still appropriate. sustainably maintain inflation within the target range and help strengthen long-term economic and financial stability. and maintaining the ability of monetary policy to withstand great uncertainty in the future. In particular, the global economic recovery is still very uncertain. the political instability of the government’s economic policies including the drought problem The violence of El Niño dragged on longer than expected. which will pass on the price of food Greater risk of inflation
In addition, the Thai economy tends to expand mainly from the tourism sector and private consumption. Although exports of goods have contracted in the short term. This was partly due to the slow recovery of the Chinese economy and the global electronic cycle. But it is expected to improve in the future in line with the global economic recovery trend. both from the export sector which could recover more slowly than expected Including the political situation which is still extremely uncertain.
about the overall picture of the Thai economy There is a tendency to continue to improve. Although the momentum of exporting goods will slow down somewhat in the short term. But the tourism sector continued to recover and have a positive impact on private consumption.
Although the inflation rate is falling from the price in the energy category. cost-of-living support measures and a high base effect in previous years. Although core inflation has fallen. but tends to remain at a higher level than in the past which still needs to monitor the risk of food costs costs If the El Niño phenomenon is severe and lasts longer than expected
As for the general financial situation, it eased. But it is not an obstacle to private funding. The increase in business borrowing costs was in line with the increase in the interest rate in the policy. The business sector continues to raise funds through debt securities. Meanwhile, the slowdown in private credit was partly due to their adjustment to the normal level. After expanding continuously during the COVID-19 crisis, the exchange rate of the baht against the US dollar fluctuated. According to the monetary policy direction of the US Federal Reserve Chinese economic forecast and political instability in Thailand
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