Thai Policy Rate is Appropriate for Now, but Middle East War Raises Concerns

BANGKOK (Reuters) – The governor of Thailand’s central bank has stated that the current policy rate is suitable for the economy, though the bank is prepared to make "adjustments" if necessary due to rising global risks and concerns surrounding conflict in the Middle East.

Sethaput Suthiwartnarueput addressed reporters on Saturday, indicating that Southeast Asia’s second-largest economy is still on track to grow near the forecast of 2.8% this year, albeit with expectations of softer growth in the third quarter.

He noted that the central bank’s growth projection of 4.4% for 2024 will be revisited if there are any changes to the government’s stimulus measures. Last year, the economy expanded by 2.6%.

Sethaput expressed concern regarding the implications of the ongoing conflict in the Middle East, describing it as a complex issue to assess. Despite this, he reiterated that the current policy rate remains appropriate.

"The rate is suitable for this period… However, if conditions deviate significantly from our forecasts, we will consider adjustments," he stated.

In the previous month, the Bank of Thailand’s monetary policy committee unexpectedly increased the key interest rate by 25 basis points to 2.50%, marking the highest level in a decade. This decision was influenced by expectations for growth and inflation to accelerate in the upcoming year. The next policy review is scheduled for November 29.

Overall, the interest rate has risen by a total of 200 basis points since August of last year, aimed at controlling elevated inflation.

The baht has experienced greater volatility compared to its regional counterparts, primarily due to external factors and capital outflows from the country. The baht has depreciated approximately 4.4% against the dollar this year, with capital outflows totaling 308 billion baht since January.