BANGKOK: Thailand’s central bank held off raising its benchmark interest rate to support a nascent economic recovery, even as it sees rising risks from inflation that has breached its target range.

       The Bank of Thailand’s (BoT) rate-setting committee decided unanimously yesterday to hold the key rate at a record-low 0.5% for a 14th straight meeting, as expected by all 24 economists in a Bloomberg survey.

       Economies globally are seeking to navigate a recovery path between tenacious virus variants and inflation pressures, while South-East Asia faces a particular risk to capital flows as the United States Federal Reserve prepares to raise interest rates.

       Indonesia, which decides policy today, has turned hawkish, while Singapore has tightened policy twice since October.

       The Thai bank “is likely to remain somewhat cautious about the economic outlook in the wake of rising Covid cases. However, its job will have become more complicated” as price pressures build, said Mitul Kotecha, chief emerging markets Asia and Europe strategist at TD Securities in Singapore.

       “With inflation rising and major central banks becoming more hawkish, pressure to shift policy will grow in the months ahead.”

       The baht was up 0.2% to the dollar at 3:17pm local time yesterday. The benchmark SET Index Stock, which reached its highest level since August 2019 after the decision, pared its gains to 1.1%.

       Prime Minister Prayuth Chan-Ocha’s government has resumed quarantine-free visa entry and planned talks on travel bubbles with China and Malaysia to revive its tourism industry.

       Meanwhile, it’s also controlling key food and fuel prices to help minimise inflation’s impact on consumers.

       Consumer prices accelerated by 3.23% in January, the fastest since last April and above the central bank’s 1%-3% policy target range for this year set in December.

       “The BoT looked through above-target inflation, leaving its policy rate unchanged for the 14th consecutive meeting on Wednesday (yesterday). Its focus remains on supporting growth, a bias we expect to remain intact all year.

       “We still don’t expect the BoT to start tightening monetary policy until 2023, once the recovery gains sufficient traction. The central bank does not expect gross domestic product to return to pre-Covid-19 levels before the first quarter of 2023,” said Bloomberg Economics Asean economist, Tamara Mast Henderson.

       Headline inflation this year “would be higher than previously assessed and could exceed the target range in the early part of the year,” the central bank said in its statement, though it still expects the full-year average to be within the target range.

       The bank’s most recent inflation forecast for 2022, issued in December, was 1.7%.

       The bank will become concerned only if inflation remains elevated for a long time, but for now the rise is expected to be temporary, assistant governor Piti Disyatat said in a briefing after the decision.

       “We haven’t seen a broad-based price increase yet, so we are not too concerned on overall inflation for now,” Piti said. “Inflation exceeding the target is normal, and it doesn’t mean we need to adjust the rate right away as long as we have credibility.”

       Covid-19 cases are rising again due to the highly-contagious Omicron variant. New daily infections have risen above 10,000 since Feb 5, after staying below that level since late October.

       Despite that, gross domestic product is still expected to grow in line with the previous forecast of 3.4% this year, Piti said. — Bloomberg