On July 28, 2008, the Bank of Thailand (BOT) released a quarterly ;Inflation Report” to project the Thai economic and inflation trend over the next eight quarters. In the report, their economic growth forecast for 2008 was revised downward and the growth estimate for 2009 was also cut slightly. Meanwhile, the 2008 and 2009 inflation rate projections were lifted sharply. In a briefing, the BOT stated that soaring core inflation above the BOT's inflation targeting range had stemmed from uncontrollable external factors. The central bank also forecast that core inflation would exceed the upper boundary of their inflation targeting framework for some time.
KASIKORN RESEARCH CENTER (KResearch) takes the view that the Monetary Policy Committee (MPC) will remain challenged by inflationary pressure plaguing domestic stability when it comes to their monetary policy implementation. KResearch forecasts that core inflation will remain higher than the MPC's upper target limit of 3.5 percent for some time. KResearch forecasts that core inflation may stay above 4.0 percent in 4Q08 and into 1Q09. It is possible that core inflation will move downward to the MPC's inflation target range of 0-3.5 percent around April 2009, at the earliest.
Although BOT has said that their monetary policy will be aimed mainly at bringing core inflation down to their target range of 0-3.5 percent within the next eight quarters, the timeframe seems to be rather flexible. Amid an outlook of economic slowdown in 2H08, a question has been raised about how much tightening can be applied to the BoT's monetary policy in actual practice. What should also be monitored is the appointment of the new MPC members per the Bank of Thailand Act, B.E., 2551, to replace the existing committee that will end their tenure at the end of August.