Thai central bank wants to continue interest rate normalisation -official

By Kitiphong Thaichareon

BANGKOK (Reuters) - Thailand's central bank wants to continue normalising interest rates and the recent election and efforts to form a new government should have no bearing on monetary policy, a deputy governor said on Thursday.

Despite recent rate hikes, Thai interest rates are still low due to cuts during the COVID pandemic and the central bank has pledged to gradually return them to normal levels consistent with long-term economic growth prospects.

There is no need to wait and see what policies are formulated by the parties that won the May election before deciding whether or not to raise rates further, Mathee Supapongse told reporters.

The policies of all political parties are largely aimed at stimulating the economy, but the effect of monetary policy will take time to be felt, he said.

Southeast Asia's second-largest economy is in recovery and is expected to return to its potential growth level next year, Mathee said.

"We would like to build more policy space. But in deciding rates, there are several committee members so I can't tell whether there will be a hike or not next time," he said.

"But in my view, I want to continue to normalise," said Mathee, who sits on the monetary policy committee.

Last week, the Bank of Thailand (BOT) raised its key interest rate by a quarter point to 2.00%, citing elevated core inflation. It has increased the rate by a total of 150 basis points since August.

The BOT will next review policy on Aug. 2, when some economists see a rate pause given falling inflation.

Annual headline inflation in May slumped to its lowest in 21 months of 0.5%, below the BOT's target range of 1% to 3%, while the core inflation rate stood at 1.55%.

Mathee said the below-target inflation was seen as temporary and this year's average figure should stay within the target range.

The central bank, however, said it was ready to adjust the pace and timing of policy normalisation if the outlook for growth and inflation shifted.

Last week, it forecast average headline inflation at 2.5% this year and 2.4% next year.

The BOT also maintains its forecasts for economic growth at 3.6% this year and 3.8% next year. The economy expanded 2.6% in 2022.

(Reporting by Kitiphong Thaichareon, Writing by Orathai Sriring; Editing by Kanupriya Kapoor, Martin Petty and Susan Fenton)