Thursday, Oct 6, 2022
International Finance
Banking

Bank of Thailand to use monetary policy to fight economic downturn

Thailand monetary policy
The central bank cut borrowing costs to 1.25 percent earlier this month

The Bank of Thailand is prepared to use monetary policy if the economic growth slumps, Governor Veerathai Santiprabhob told the media. 

 

“In the short term, we are ready to use monetary policy if needed,” he said. “We are ready to act if growth fails to meet our expectations.”

Earlier this month, the Bank of Thailand cut borrowing costs to 1.25 percent. This interest cut is the second reduction in three months. The baht is considered Asia’s best performing currency after it gained more than 9 percent against the US dollar in the last year, the local media reported. 

The Governor warned that the benchmark key interest rate should not go below zero because hitting negative will cause structural problems. The Bank of Thailand is deeply concerned about the currency’s strength. It is closely monitoring the financial situation toward the end of the year — a period when high volume of foreign exchange transactions take place. The Bank of Thailand is exploring other options to boost policy transmission process through new players or financial markets. 

Economists predict that the Bank of Thailand might cut policy interest rate next year. The country’s financial stability risk is creates challenges such as monetary risk — although inflation is not a huge problem. 

Thailand’s current economic growth forecast for 2019 and 2020 remains at 2.8 percent and 3.3 percent respectively. However, the monetary authority’s 2020-2020 strategy indicates that volatility was inevitable as it is caused by a range of unpredictable external factors. 

Also, the Bank of Thailand has decided to review foreign exchange laws to boost flexibility and allow regulations that support financial technologies such as digital currencies. 

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