BANGKOK (Reuters) -Thailand’s central bank chief said there was a need for greater flexibility and tolerance regarding deviations from inflation targets, citing risks associated with excessive fine-tuning of monetary policy.
Inflation may deviate from targets more often and more persistently even as it is anchored over time, Bank of Thailand Governor Sethaput Suthiwartnarueput said in a speech published by the central bank on Friday.
“The ability of central banks to steer inflation, especially within narrow ranges, becomes more limited,” Sethaput said in London on Wednesday, according to the transcript, noting price shocks and relative price trends.
“We need to recognise clearly the risks associated with overly active and excessive fine-tuning of policy,” he added.
Thailand’s annual headline inflation rate was negative in May, having been below the central bank’s target range of 1.0% to 3.0% for the third consecutive month. It averaged 0.48% in the first five months of the year.
In April, the BOT cut its key interest rate by 25 basis points to 1.75%, the lowest level in two years, due to risks from steep U.S. tariffs. The next rate meeting is on June 25.
Inflation targeting should evolve towards increased flexibility, reducing the heavy emphasis on achieving precise numerical targets and allowing monetary policy to keep a sharp focus on the medium term, Sethaput said.
(Reporting by Orathai Sriring and Thanadech Staporncharnchai; Editing by John Mair, Martin Petty)
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