With economic recovery gaining traction and inflation pressure increasing, policy normalization  1  •  must begin. Rate hikes will help contain inflationary pressures and ensure price stability that is required for a sustained growth path. A gradual removal of financial support measures is in line with income recovery while encouraging banks to continue the normal functioning on their own with proper risk management. Pursue a gradual and measured normalization regarding the pace and sequencing of policy withdrawal a. [Financial front] Moving from broad “blanket-type” to targeted measures. A gradual and measured approach allows flexibility to withdraw financial measures with limited impact. Broad-based measures will be normalized first in line with the overall macroeconomic strength. Targeted measures need to stay in place to help support those that still lag behind as the recovery is uneven. • Targeted financial measures that will still be in place: 1) long-term debt restructuring until “at least” end of 2023 to be in line with the recovery path of the economy/income of retail borrowers 2) asset warehousing program until “at least” April 23 by which the tourism sector is expected to recover, and 3) special loan scheme until “at least” April 23 to encourage businesses to adapt to new trends of the post-pandemic world (digital, technology, green). The clause “at least” means we will be flexible, pragmatic and only remove them once deemed appropriate. b. [Monetary policy front] • Gradual: We do not see the need to undertake aggressive heroically large rate hikes.

If the MPC does not take any action, there is then a danger of moving from a low inflation regime to a high inflation regime. Given that core inflation tends to be more persistent, we need to be watchful of any further sustained pickup in momentum. 3. Financial stability remains sound overall but there remain pockets of vulnerability. a. Financial institutions remain sound with robust capital positions and high liquidity, while NPL ratios remain low. b. Debt serviceability of households and businesses has improved in line with the economic recovery and with support from financial measures implemented since the crisis. However, there are vulnerable segments given the uneven nature of recovery especially SMEs in sectors that are lagging and low-income households. Therefore, targeted measures will still be in place to support vulnerable groups. Although raising interest rates may increase financial burdens for indebted households to some degree, the potential costs of sustained high inflation is much greater. Therefore, the MPC judged that policy rate hike will not harm financial stability and will in turn help prevent inflationary pressures that will hurt consumption in the future. [3.2 What should we really be worried about?] Given the reasons and trade-offs outlined above, we are taking a gradual and measured policy normalization approach. However, there remain certain issues that raise concerns to some. Let me take this opportunity to clarify several issues: (1) Thailand is not behind the curve The context of Thailand is different from other countries that have begun their rate hikes a while back. 1.