In search for a new nominal anchor, the BOT, drawing upon its experiences in monetary policy management as well as insights of other central banks, has carefully considered possible alternatives for new monetary policy regime. Inflation targeting is deemed as a new choice for monetary policy framework to achieve financial stability in Thailand. For more than a year and a half, since the beginning of 1999, the BOT has prepared for the adoption of inflation targeting by developing rigorous macroeconomic models for forecasting inflation as well as conducting trial Monetary Policy Board's meeting and submitting the Bank of Thailand Act to the parliament for revision and amendment. In addition, the BOT also tried to increase public awareness of the new monetary policy regime through increasing coverage of the mass media as well as holding public seminar on inflation targeting in preparation for the eventual adoption of inflation targeting regime taking place in late May, 2000. The goal of the Bank of Thailand's monetary policy is to maintain price stability in order to promote sustainable growth in the Thai economy.
Key features are as follow.
The MPB, an independent body, has the authority, commitment, and responsibilities upon keeping inflation within the target range. To increase transparency and to signal clear policy stance under inflation targeting framework, the MPB meets every six weeks to evaluate the economic outlook and inflation prospects in order to steer future directions of monetary policy. Immediately after the meeting, the MPB makes a public announcement, whether to raise, decrease or level off the key policy rate in order to signal the monetary policy stance. By explaining the rationale behind the monetary policy decision, the MPB makes its monetary policy conduct transparent to the public. Such a transparency, together with the MPB's commitment to abide by the target, enhances the MPB's accountability.