Kasikornbank (KBank) has said it is anticipating the Thai currency to bottom out within the next two months, primarily on the Federal Reserve’s benchmark interest rate increase. The agency also expects the Bank of Thailand (BOT) to increase its benchmark rates at least twice for 2022 in response to the monetary fluctuation.
According to Kobsidthi Silpachai, head of the market and economic research unit at Kasikornbank (KBank), two policy rate hikes of 50 basis points this year could be enough to keep inflation in check and the foreign exchange rate under control. He predicted that the Monetary Policy Committee (MPC) would raise the policy rate by a quarter-point at its meeting in August. The MPC is expected to raise the policy rate by 25 basis points again in November, at its final meeting of the year.
The MPC voted 4-3 in June to maintain the policy rate at 0.5 percent, where it has been since May 2020. The three members who voted to raise the policy rate have urged for a 0.25 percentage point increase.
KBank forecasts a 2.5% economic growth for Thailand in 2022. However, this forecast may be revised due to the baht movement caused by the US Federal Reserve’s benchmark interest rate hike.
The research unit also believes that the US might increase its benchmark rate by 200 basis points throughout this year which will strengthen the dollar against other currencies. Under this scenario, the baht will continue to weaken over the next few months, necessitating adjustments by the BOT to ensure that the economy is not adversely affected.