Fed’s Moves Not to Influence Thailand’s Rate Path, Sethaput Says
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(Bloomberg) — Thailand’s central bank will stick with its “gradual and measured” policy tightening path even as peers resort to large interest-rate increases to keep pace with the US Federal Reserve, according to Governor Sethaput Suthiwartnarueput.
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(Bloomberg) — Thailand’s central bank will stick with its “gradual and measured” policy tightening path even as peers resort to large interest-rate increases to keep pace with the US Federal Reserve, according to Governor Sethaput Suthiwartnarueput.
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That approach means the Bank of Thailand doesn’t see the need to undertake large moves, while being open to either pause or even deploy half-point hikes depending on what data show, Sethaput said in an interview with Bloomberg Television’s Haslinda Amin and Rishaad Salamat on Wednesday.
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The central bank raised borrowing costs by a quarter-point this month for the first time since 2018, supplementing efforts by the government to cool inflation from a 14-year-high through energy subsidies. With only two more rate meetings to go this year, Sethaput hinted that the BOT need not worry about how fast or long the Fed moves, or mimicking emerging Asian peers that have employed large hikes.
“All other countries hiked when their GDP reached pre-covid levels,” Sethaput said, referring to gross domestic product levels at the time of their first post-pandemic increase. “But we did it before” and that shows the BOT isn’t behind the curve.
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The Fed’s rate path isn’t the only risk for the baht. Growing domestic political tensions over the term of Prime Minister Prayuth Chan-Ocha is a threat to the strength of the currency, already the worst performer in Asia this week.
“Exchange rate pass through in terms of headline inflation in Thailand is extremely low,” Sethaput said, adding that it’s “not a major source of inflation.”
Still, it adds pressure on the BOT to do more to rein in price gains, currently at 7.6%, without further hurting the economy’s growth already on course to be the slowest in Southeast Asia.
Foreign visitors flocking back to Thailand is a bright-spot, as tourism makes up some 12% of the economy. The country expects tourist arrivals touching anywhere north of 8 million in the current year, Sethaput said.
But reaching pre-pandemic levels of 40 million will be linked to factors such as the opening up of China, the largest source of visitors to Thailand.
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