Thai interest rates raised to 2% by BoT amid core inflation worries

The Monetary Policy Committee of the Bank of Thailand (BoT) anticipates ongoing economic growth with some potential risks, as evidenced by their decision to increase the key Thai interest rates for the sixth consecutive meeting, according to the minutes released recently.

On May 31, the committee unanimously agreed to increase the one-day repurchase rate by a quarter point to 2%, attributing the decision to rising core inflation. The minutes highlighted that policy rate normalisation would continue gradually, with the aim of maintaining positive real interest rates.

Thai interest rates are still low as a result of reductions implemented during the Covid-19 pandemic. The Central Bank has committed to a gradual return to normal levels that align with long-term economic growth prospects.

The minutes also noted that the potential for increased minimum wages could lead to the pass-through of labour costs. The BoT is set to review its policy on August 2, with some economists predicting a pause in rate hikes due to decreasing inflation.

Furthermore, the BoT announced that the country’s headline inflation for June is expected to be low, given the high base from last year. However, it is anticipated to rise later in the year reported Bangkok Post.

Following the BoT’s policy rate increase, state banks have adjusted their interest rates for loans and deposits, leading to deposit rates exceeding those for loans. High-yield deposit campaigns were introduced, increasing both interest and prizes. Read more HERE.

In a connected move, financial institutions have proactively taken measures to support mortgage clients as they navigate the challenges posed by increasing interest rates.

Amid the rising Thai interest rates, the bank’s customers have successfully managed to maintain their debt obligations without faltering. Nonetheless, it was observed that approximately 0.5% of mortgage clients could potentially face difficulties in fulfilling their debt repayments if the upward trend in interest rates persists. Read more HERE.