25-9-2023 (BANGKOK) Thailand’s central bank, the Bank of Thailand (BOT), is anticipated to maintain its key policy rate at 2.25 per cent during its upcoming meeting and likely throughout 2024, ending a year-long cycle of tightening, as indicated by a Reuters poll. However, a few economists still expect one final rate hike.
Despite a slight increase in inflation in Thailand to 0.88 per cent in August, it has remained below the central bank’s target range of 1-3 per cent for a fourth consecutive month. This suggests limited necessity for further rate hikes.
Governor Sethaput Suthiwartnarueput recently expressed expectations of lower economic growth and inflation, attributing it to softer tourism spending and a weaker economic outlook for China, Thailand’s major trading partner.
A significant majority of economists participating in a poll from September 18 to 22, 21 out of 27, anticipate the BOT maintaining its benchmark one-day repurchase rate at 2.25 per cent. Only six of them predict another quarter-point increase to 2.50 per cent.
Lavanya Venkateswaran, Senior ASEAN Economist at OCBC, explained, “The BOT will switch to a wait-and-see mode. It is actually in a relatively comfortable position to take its time in terms of making its policy decisions because growth is strong, inflation is low. We don’t see inflation coming back to within BOT’s target for the rest of this year at least, and possibly even in Q1 next year… so I don’t think in the near term there’s a need to rush into further hikes.”
None of the economists expected the central bank to raise interest rates at the subsequent meeting in November. Median forecasts indicate interest rates staying at 2.25 per cent throughout next year.
However, opinions diverged among those with a longer-term outlook on rates. Forty-seven per cent of economists, nine out of nineteen, anticipate the BOT maintaining rates at 2.25 per cent until the end of 2024. Meanwhile, six predict another increase to 2.50 per cent, and four anticipate a cut, with three expecting a reduction to 2.00 per cent and one to 1.75 per cent.
Aris Dacanay, ASEAN Economist at HSBC, noted that despite a growth slowdown, it is evident that the BOT is determined to raise rates at least once more to reach its estimated neutral rate.
