Thai central bank may maintain policy rate amid economic uncertainty
KResearch, the research arm of Kasikorn Bank, has predicted that the Bank of Thailand (BOT)’s Monetary Policy Committee (MPC) will likely maintain the interest rate at its upcoming meeting on October 16.
However, the report suggests that the decision may not be unanimous, hinting at a potential shift towards a more accommodative monetary policy.
While KResearch anticipates a consensus to keep the policy rate at 2.5%, it also suggests that the MPC may be considering interest rate cuts in the future, possibly as soon as May 2025. This outlook is driven by several factors.
One of the primary concerns is Thailand’s fragile economic recovery, which faces higher risks. Despite expected growth in the latter half of the year, backed by exports, tourism and government spending, challenges such as floods and a global economic slowdown remain significant.
Inflationary pressures are also expected to stay low, with headline inflation for the fourth quarter of 2024 likely falling within the BOT’s target range of 1-3%, largely due to a favourable base effect and governemnt measures to ease living costs. For 2024 as a whole, KResearch forecasts headline inflation to average 0.5%.
Additionally, the global trend of monetary easing, including the Federal Reserve’s recent rate cut, has put pressure on the Thai baht, which has appreciated. This currency strength has affected the revenue and profitability of Thai exporters.
In June, the BOT projected that Thailand’s economy would grow by 2.6%, with headline inflation at 0.6% for 2024. However, KResearch now warns that the BOT may revise its 2025 economic forecast downwards due to increasing uncertainties.
