KHON KAEN, Thailand, Dec 22 (Reuters) - Thailand’s central bank will not keep raising the benchmark policy rate, after the first policy tightening in more than seven years, as accommodative monetary policy is still needed to support economic growth, the bank’s governor said on Saturday.
Unlike in the past, any policy tightening will not be continuous and will be data-dependent, Veerathai Santiprabhob told reporters.
“Accommodative policy is still needed for the Thai economy but the need for extra accommodative policy has reduced,” he said.
On Wednesday, the Bank of Thailand (BOT) hiked its key policy rate by 25 basis points to 1.75 percent to curb financial stability risks and to start “building policy space” - giving it room to cut the benchmark if global conditions deteriorate.
After the increase, the rate is still only 50 basis points above the all-time low. The previous time the rate was hiked was August 2011.
The BOT will next review monetary policy on Feb. 6.
The policy rate hike is not expected to prompt an increase in lending rates by commercial banks because of high liquidity in the banking system, Veerathai said.
While economic growth is expected to slow to 4.0 percent next year from 4.2 percent seen for 2018, the pace will still be in line with the country’s growth potential and higher than an average rate over the past 10 years, he said.
Last year, Southeast Asia’s second-largest economy expanded 3.9 percent, the fastest pace in five years. (Reporting by Kitiphong Thaichareon Writing by Orathai Sriring Editing by Ros Russell)