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BOT warned rate hike before Q4 will lead to economic slump

Since inflation was being driven by costs rather than economic growth, raising the policy rate would not do much to contain it, Montree added.

The MPC has to consider various economic impacts before making its policy rate decision, said Montree.

Raising the policy rate would not bring down energy and food prices, but it would support the weakening baht, which has fallen to Bt35 per dollar. And this would help Thailand pay for oil imports.

However, retaining the policy rate would lead to further baht depreciation, meaning Thailand would have to exchange more baht for dollars to buy oil – affecting the country’s current account balance.

Leaving the policy rate untouched would also hit the baht as foreign investors would move their money to the US where yields are higher after the policy rate was raised by 0.75 percentage points last Wednesday.

A weak baht would, however, help…

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See also  Cleaning the economy
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