The cabinet has approved the central bank's headline inflation target of 1-3% for next year, narrowed from this year's 1-4% range, a government spokeswoman said on Tuesday.
The new target will be in line with the current economic situation and offer more flexibility in monetary policy implementation, Narumon Pinyosinwat told reporters.
Speaking to reporters after the government’s announcement, Bank of Thailand Deputy Governor Mathee Supapongse said there’s no longer a midpoint target, allowing for more policy flexibility. Previously, the goal was to reach the band’s midpoint at 2.5%.
Policy makers now will review the target every six months, rather than annually, he said.
The central bank first adopted the 1%-4% target in 2015, but only managed to get annual average inflation above 1% in 2018. The bank has cited structural factors for driving down prices, including the growth in e-commerce and an aging population.
A stronger currency has curbed price pressures and contributed to weaker economic growth. The baht has surged more than 19% against the dollar since the start of 2016, according to data compiled by Bloomberg.
The central bank last week held its benchmark interest rate at 1.25%, matching a record low, and cut its inflation forecasts for both this year and next to below 1%. The government on Tuesday forecast inflation in 2021-2024 will be in a range of about 0.7%-1.7%, while growth will reach 3.1%-4%.
Deputy Governor Mathee said loose monetary policy will continue to support economic growth. He said there’s no need for unconventional policy measures like quantitative easing in Thailand since there’s adequate liquidity in the economy.