BOT:Minor increase in key interest rate is good for Thai economy in long run

BANGKOK, January 2 (TNA) - A slight increase in the key interest rate recently, from 1.50 per cent to 1.75 per cent, announced by the Monetarty Policy Committee (MPC), under the Bank of Thailand (BOT), is considered suitable and good for the national economy in the long run. According to an MPC report, released on Wednesday, its recent decision to raise Thailand's key interest rate by 0.25 per cent was based on the fact that the national economy has kept expanding clearly and sufficiently enough to cope with the minor increase in the central bank's key interest rate. The MPC report stated that the slight increase in the key interest rate should not seriously affect the expanding Thai ecnomy, but it should, instead, help cushion the stability of the domestic financial system and sustain the national economy growth in the long term by reducing risk factors and widening the central bank's financial policy space in the future. The MPC report said that its stance on making use of the BOT's policy tools and what is considered the suitable level-key interest rate to take care of the country's financial stability, known as macroprudential measures, should boost the efficiency of the Thai financial system, as a low level of the key interest rate for a long period of time should cause an accumulated vulnerability in the domestic financial system. Besides, the slight increase in the key interest rate recently should help consumers to gradually adjust their behaviors to a balanced level in terms of their savings, loans and investment plans while Thailand is approaching a world aging society over the next decade. However, the MPC report indicated that the BOT will keep monitoring closely impacts, both positively and negatively, from the slight increase in the key interest rate and will implement appropriate measures to be in accordance with the updated situation. Meanwhile, the MPC report adjusted downward Thailand's gross domestic product (GDP) growth in 2018 and 2019 to 4.2 per cent year-on-year and 4 per cent year-on-year on average respectively, from 4.4 per cent year-on-year and 4.2 per cent year-on-year, citing such external risk factors as negative impacts from the ongoing trade war between the United States and China, as well as the fluctuating world financial market due to Britain's exit from the European Union (EU) without any concluded agreement (no-deal Brexit) in March 2019 as the main reasons. The MPC report cautioned that lower levels, than earlier expected, of the Thai government's spending on public projects, as well as the private consumption and the purchasing power in the country, especially in the domestic farm sector, should also become internal risk factors against the country's GDP growth this year. (TNA)