Thai finance chief favours modest rate hike to shield growth

BANGKOK: Thailand’s central bank should should focus on staying away from a steep policy tightening path to protect the economy’s recovery, while taming the fastest inflation in more than a decade.

“They have to make sure the economy recovers and at the same time they can curb inflation,” Finance Minister Arkhom Termpittayapaisith said in an interview on Monday, two days before the Bank of Thailand’s (BOT) rate review.

“If you need growth, then the increase in the rate may be not so much surely.”

The BOT is expected to raise borrowing costs from a record low today to tame inflation, hovering at a 14-year high. The authority had bucked the trend of central banks from the Philippines to India in hiking rates amid concerns about derailing an economy that’s only just recovering from the pandemic.

Still, any rate action this week by the BOT may be measured. Of 27 economists in a Bloomberg survey as of Monday, 24 predicted a quarter-point hike today, with the remaining three expecting a half-point increase.

The central bank must consider whether its actions to curb inflation would also affect consumption and cost of doing business, said Arkhom, who added he’s been talking to BOT governor Sethaput Suthiwartnarueput.

“We have to balance (things), making sure we are on the path of recovery,” the finance chief said.

The government, Arkhom said, has also done its share in battling rising prices through subsidies for diesel and power prices.

“You can counter inflation but to what degree? At the same time, we also need people to spend,” Arkhom said.

He sees inflation, which came in at 7.6% last month, peaking this quarter and slowing as global oil prices ease.

Already, the country is seeing the return of stronger consumption as tourism rebounds and household incomes start to recover.