- Bank says current key rate at neutral level still appropriate
- Says inflation seen low or negative into early next year
- Says minimum wage hikes won't affect inflation forecasts
BANGKOK, Dec 13 (Reuters) - Thailand's current policy rate at a neutral level remains appropriate for the economy, while inflation is expected to gradually increase to within a target range, central bank officials said on Wednesday.
The policy rate, standing at a decade high of 2.50%, can see off both upside and downside risks to the economy, the officials said, as the government plans a digital wallet policy to give Thais 500 billion baht ($14 billion) to boost spending.
"The current rate at 2.5% is robust for the overall economic picture, with or without the digital wallet," Piti Disyatat, the assistant governor of the Bank of Thailand, told a monetary policy forum.
Southeast Asia's second-largest economy is recovering, albeit slowly, reducing the need for a monetary policy boost, he said, while adding that there was room for fiscal policy to support long-term growth.
The bank's director, Phurichai Rungcharoenkitkul, said the current policy rate was not impeding the economic recovery and allowed the BOT to move both ways if needed.
Last month, the BOT left its key rate unchanged at 2.50% after hiking it by 200 basis points since August last year to curb inflation.
It will next review policy on Feb. 7, when most economists expect no policy change.
Last month, the BOT cut its forecast for 2023 growth to 2.4% from 2.8%. For next year, it predicts growth at 3.2%, but if the digital wallet policy is adopted, growth is seen at 3.8%. The economy expanded 2.6% last year.
Headline inflation is forecast to gradually rise to within the central bank's target range of 1% to 3%, with the rate seen low or negative into early next year due to government subsidies but not reflecting deflation, the BOT said.
"We expect inflation to turn positive in the first quarter," said senior bank director Surach Tanboon, adding that minimum wage hikes would not affect inflation forecasts.
The central bank forecast headline inflation of 1.3% this year and 2.0% next year, not factoring in digital wallet spending.
The headline consumer price index (CPI) fell 0.44% in November on the year, though core CPI rose 0.58% in the month.
October and November figures of headline inflation would have been +0.9% and +0.7%, respectively, if not for government subsidies for energy and electricity, central bank data showed.
The economic recovery is intact but structural impediments could limit the positive impact of the global economy on exports, the bank's minutes showed on Wednesday.
Southeast Asia's second-largest economy grew much less than expected, at 1.5% in the July-September quarter from a year earlier, for the year's slowest pace, thanks to weak exports and government spending.
Prime Minister Srettha Thavisin has said the economy is in a "crisis".
($1=35.71 baht)
Reporting by Orathai Sriring, Chayut Setboonsarng, Kitiphong Thachareon and Satawasin Starporncharnchai; Editing by Jamie Freed and Clarence Fernandez
Source: Reuters