Arkhom recommends gradual rate hikes

published :
22 Jun 2022 at 06:11

Finance Minister Arkhom Termpittayapaisith

Finance Minister Arkhom Termpittayapaisith asked the Bank of Thailand to discuss with commercial banks whether they can raise their interest rates on a gradual basis in the event the central bank decides to raise its policy rate.

Mr Arkhom said the central bank shares the ministry’s goal of continuing a gradual Thai economic recovery.

He said every country is suffering from rising inflation based on the spike of global energy prices.

Recently central bank governor Sethaput Suthiwartnarueput said increasing the policy interest rate should not happen too late because inflation continues to rise.

State-run Government Savings Bank (GSB) vowed to try to maintain its interest rates for as long as possible amid the trend of rising global rates, in an effort to alleviate the burden on its borrowers.

GSB president Vitai Ratanakorn advised companies to increase their liquidity, which could take a hit after future rate increases.

At the June meeting of the central bank’s Monetary Policy Committee (MPC), the group voted 4-3 to keep the policy rate at the existing level of 0.5%, where it has been anchored since May 2020.

Three members voted to raise the policy rate by 0.25 percentage points.

The MPC’s next meeting is scheduled for August. Many research houses expect Thailand will begin a cycle of policy rate hikes in the second half of this year in response to persistently high inflation.

The current inflation rate would increase household expenses by around 850 baht per month, while a 100-basis-point policy rate increase would raise household expenses by 120 baht per month, according to the MPC.

The impact of the rising inflation rate is seven times greater than increasing the interest rate, said the committee.