Thai inflation target signals no changes in monetary policy: deputy governor

Thailand’s new inflation target range of 1 percent-3 percent for next year, narrowed from this year’s 1 percent-4 percent, does not signal a change in monetary policy implementation, a deputy central bank governor said on Tuesday.

Monetary policy will still be data-dependent and will likely remain accommodative to support economic growth and help inflation return to target, Mathee Supapongse told reporters.

“The reduced inflation target does not signal that monetary policy will be tighter,” he said, adding it was made to be in line with changing economic and financial conditions.

“The MPC (monetary policy committee) will continue to implement accommodative policy until the economy recovers strongly and inflation gets back to target”.

Last week, the Bank of Thailand (BOT) left its benchmark policy rate unchanged at a record low of 1.25 percent after two cuts earlier in 2019.

The inflation target is reviewed each year, but the current 1 percent-4 percent range had not been changed since 2015.

The BOT has forecast headline inflation of 0.7 percent for this year and 0.8 percent for next year.

The BOT has said structural changes, such as the expansion of e-commerce, rising price competition, and technological development which reduced production costs, has caused inflation to rise at a slower pace than in the past.

Mathee said the baht’s strength was still beyond the country’s fundamentals, up about 8 percent against the dollar so far this year, becoming Asia’s best performing currency.

However, the baht is expected to gradually weaken following measures to curb the climbing currency, while it is not viewed as safe a haven as it was, he said.

“But it may take some time until the baht changes the direction ... and the BOT is still worried about the baht’s strength and is ready to take action as appropriate,” Mathee said.