(Bloomberg) — Bank of Thailand expects inflation to stay within the 1% to 3% target range in the next two years, Governor Sethaput Suthiwartnarueput said, describing the band as appropriate and supportive of the nation’s growth potential.
Most Read from Bloomberg
The central bank chief said the inflation target, which has been kept for a fifth straight year, has “a proven track record of anchoring medium-term inflation expectations” and provides “sufficient flexibility towards accommodating inflation volatility from external and supply-side shocks,” he said in a statement days after the Cabinet approved the monetary policy target for 2025.
Thailand’s inflation has remained below the target for a sixth straight month at 0.95% in November, and that has added pressure for the monetary authority to reduce borrowing costs. Still, on Dec. 18, BOT left its key interest rate unchanged at 2.25% following a surprise cut in October.
“The MPC assessed that average headline inflation for 2025 and 2026 would remain within target range, although during some periods headline inflation might move temporarily outside of the target range due to economic shocks,” he said.
Bank of Thailand and the Ministry of Finance have agreed to hold regular discussions to ensure coordinated fiscal and monetary policies, according to the statement. “In case of necessary or fitting circumstances, the Minister of Finance and the MPC may, by mutual agreement, revise the monetary policy target before proposing the new target to the cabinet for approval,” Sethaput said.
Monetary policy will aim to foster sustainable growth and financial stability, and this involves appropriately setting the policy interest rate with support of other tools to help prevent excessive exchange rate volatility, he said.
There are no explicit commitments in the agreement to boost inflation to a midpoint target of 2% as pushed by Finance Minister Pichai Chunhavajira.
If the average headline inflation in the past 12 months or the forecast for the next 12 months falls outside the target, the MPC would issue an open letter to the finance minister that would detail the reasons for the breach, the monetary policy actions undertaken in the past and going forward to guide inflation back to target, according to the statement.
Most Read from Bloomberg Businessweek
©2024 Bloomberg L.P.