Bank of Thailand policy makers stuck by a pledge that monetary tightening should be gradual and measured, but noted it could be adjusted should the growth and inflation outlook change, minutes of their last meeting show.
Members of the Monetary Policy Committee (MPC) acknowledged the difficult trade-off between rising demand-side inflationary pressure amid an improving economic outlook and supporting the recovery at a time when some businesses and households remained fragile, according to the minutes released on Wednesday.
The committee voted unanimously at its Jan 25 meeting to raise the one-day repurchase rate by a quarter point to 1.50% to try to bring inflation back within target. Commercial and state banks responded by raising their deposit and lending rates for the first time in nearly three years.
The MPC will next review policy and update economic forecasts on March 29, when most economists forecast a further rate increase.
The central bank’s current forecast is for economic growth of 3.7% this year. Last week, Deputy Prime Minister Supattanapong Punmeechaow predicted growth could reach 4% this year, helped by a tourism boom.
The committee viewed that the economy would continue to expand, with tourism and private consumption gaining traction thanks to the return of Chinese tourists, the minutes said.
Inflationary risks had increased and warranted close monitoring since, while headline inflation would continue to decline, “there was a risk that core inflation would stay high for longer than expected”, the minutes said.
Headline inflation cooled to its lowest rate in nine months at 5% in January, but was still well above the central bank’s target range of 1-3%.
The baht has appreciated significantly against the dollar due to expectations of a slower pace of US rate increases and China’s reopening, the minutes said, adding the committee would closely monitor volatility in the foreign-exchange market.
