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Thai central bank says key rate to stay low for 1-2 years

Thai central bank says key rate to stay low for 1-2 years

FILE PHOTO: Thailand's central bank is seen at the Bank of Thailand in Bangkok, Thailand April 26, 2016. REUTERS/Jorge Silva

BANGKOK: Thailand's benchmark interest rate may stay at a record low of 0.5per cent for one or two years until the economy has seen a clear recovery, a central bank official said on Monday, as the country deals with a third wave of COVID-19 infections.

Inflation may rise temporarily but stagflation is not expected, Don Nakornthab, senior director at the Bank of Thailand (BOT), told an economic forum.

Inflation in the second quarter may exceed the BOT's target range of 1per cent to 3per cent, but that will be temporary due to a low base last year, he said.

"Stagflation is very least likely. A more concern is inflation will not rise," Don said.

The BOT has left its policy rate unchanged since mid-2020 and warned of the impact of the current outbreak, which has accounted for about 80per cent of Thailand's total cases and deaths.

It will next review policy and economic outlook on June 23.

"The policy rate is at record low and will probably stay at this level for a while. In a year or two, there may not be an increase," Don said.

The distribution of vaccines will be the most important factor for reviving the tourism-reliant economy, he said. Mass vaccinations will start next month.

The BOT has said the policy rate level was not an issue and the problem was the distribution of liquidity to needed areas.

"Cutting rates further will not help anything," Kanit Sangsubhan, a member of the BOT's monetary policy committee, told the forum.

The outbreak will worsen the country's high household debt, now around 89per cent of gross domestic product (GDP), Don said.

Thailand's public debt to GDP ratio can go higher than its ceiling of 60per cent if necessary as it remains relatively low compared with some other countries, Don said.

Thailand's new borrowing of 700 billion baht (US$22.3 billion) approved last week would be for supporting the economy into next year, finance ministry official Pisit Puapan said.

(US$1=31.35 baht)

(Reporting by Orathai Sriring, Kitiphong Thaichareon, Satawasin Staporncharnchai; Editing by Martin Petty)

Source: Reuters


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