By Orathai Sriring and Kitiphong Thaichareon
BANGKOK (Reuters) – Thailand’s current level of the benchmark interest rate was nearly balanced, the central bank governor said on Wednesday, adding that monetary policy would not be affected by a delay in the formation of a new government.
The Bank of Thailand (BOT) has raised its key rate seven times to 2.25% since last August to tame inflation and help foster a smooth economic recovery.
As the recovery remained intact, the BOT would ensure its monetary policy was suitable for the longer term, with inflation sustainably in the target range of 1% to 3%, Governor Sethaput Suthiwartnarueput told a central bank seminar.
“It’s near a balanced point, where the key rate allows the economy to grow as its potential and inflation is within the target range without creating vulnerability to the economic system,” he said.
A delay in the formation of a government following the elections in May would not impact the central bank’s policy implementation, but capital movement and the baht, the governor said.
“Political factors have weakened the baht lately as they created uncertainty,” he said. The baht has lost 2.5% against the dollar so far this year.
Thailand has been under a caretaker administration for five months as deadlock prolongs after the election-winning Move Forward party’s failure to form a government.
Commenting on inflation, Sethaput said the headline rate was lower than expected but would later return to the target.
Last week, the governor said the BOT might hold or hike the key rate at its next policy meeting on Sept. 27.
Minutes from the monetary policy meeting on Aug. 2 also said that policy rates were approaching stability levels.
Southeast Asia’s second-largest economy has been driven by consumption and tourism, with foreign tourist arrivals predicted at 29-30 million this year, Sethaput said.
Second-quarter gross domestic product (GDP) data, however, might not be “that good” because of softer exports, he added.
The economy expanded 2.7% year-on-year in the first quarter, helped by tourism. Official second-quarter GDP data is due to be released on Aug. 21.