By Orathai Sriring and Kitiphong Thaichareon
BANGKOK (Reuters) - Thailand's key interest rate will continue to rise until the economy grows at its full potential and inflation returns to target, with gradual policy normalisation still appropriate, the central bank said on Monday.
Monetary tightening globally has had a limited impact on the country's financial conditions, the Bank of Thailand (BOT) said in a statement issued for an analysts' meeting.
The outlook for Thailand's economy and inflation have been in line with expectations, but the central bank is ready to adjust the pace of further rate hikes if the outlook shifts, the BOT said.
The economy is expected to fully recover in the second half of 2023, when inflation should also return to within the BOT's target range of 1% to 3%, Assistant Governor Piti Disyatat told the meeting.
"So, rate hikes will have to continue for a while," he said, adding the rate committee would decide the terminal rate based on the economy in the second half of 2023.
The BOT has raised its key rate by a total of 75 basis points in three meetings since August, from a record low of 0.50%. It will next review policy on Jan. 25, when economists expect a further hike.
Thailand's tightening cycle has been less aggressive than many Southeast Asian peers as its economy has lagged behind others in the region, with the crucial tourism sector only starting to pick up this year.
The central bank has forecast the economy will expand 3.2% this year, 3.7% in 2023 and 3.9% in 2024, helped by private consumption and tourism.
It forecast 10.5 million foreign tourist arrivals this year, 22 million in 2023 and 31.5 million in 2024. That compares with just 428,000 foreign tourists last year and nearly 40 million in pre-pandemic 2019.
Slowing global economic growth should not have a big impact on foreign tourist numbers as most of them are from Asia, where economies are still doing well, Piti said.
Weakness in the baht has not affected the economy much and the currency has become more stable, said senior director Sakkapop Panyanukul.