Thai interest rate hike expected at MPC meeting on May 31: KResearch

The policy interest rate is likely to be raised by 0.25 percentage points to 2.00%. This could potentially be the last interest rate hike in this economic cycle, KResearch said.

However, the committee signalled in its previous meeting that rate rises may continue amid elevated inflation risks due to ongoing domestic recovery efforts, along with uncertainties over transmission of producer costs to consumers, and future trends in energy prices and consumer goods. These factors contribute to the likelihood of the MPC raising the rate on May 31, the research house said.

However, falling inflationary pressures, increased economic risks from domestic political uncertainty and global economic slowdown, and easing of monetary policy by major central banks worldwide may lead to the MPC pausing interest rate hikes in the near term.

Looking ahead, Kasikorn Research Center said the MPC will likely maintain the interest rate at 2.00% throughout 2023 if the Thai economy continues its sustained recovery in the latter half of the year, as anticipated.

However, it cautioned that the baht remains susceptible to volatility. The Thai currency is expected to receive support from a projected current account surplus as the tourism sector rebounds. But uncertainties surrounding the formation of a new government could exert downward pressure on the currency.

The demand for “safe-haven” assets such as the dollar amid increasing global economic risks may also contribute to the strengthening of the greenback's value, contrary to market expectations, amid the persistent high inflation and a robust labour market.