Economists are speculating that the Bank of Thailand (BOT) is poised to hike its policy rate to 2% this month, following in the footsteps of the U.S. Federal Reserve’s recent peak in its funds rate. The move is expected to be a modest 0.25 percentage points increase.
According to the research center of TMBThanachart Bank, the Monetary Policy Committee (MPC) will make the policy benchmark rate adjustment during the scheduled meeting on May 31. The BOT is then anticipated to maintain the rate for the rest of the year to concentrate on financial stability, especially in light of the current global uncertainties and high inflation rates.
The forecasted core inflation rate is expected to reach 101.5%, with headline inflation at 2.3%. The recent quarter-point rate increase by the U.S. Federal Reserve is expected to have an impact on the movement of the Thai baht against the U.S. dollar.
Similarly, Kasikorn Research Center predicts a similar 0.25 percentage point hike in Thailand’s benchmark rate this month. After the adjustment, the BOT is expected to closely monitor the global economy and any increased risks for the U.S. financial industry before deciding on any further policy rate adjustments.
However, Standard Chartered Bank predicts that the 0.25 percentage point increase is the end point for this interest rate cycle. Despite the current global uncertainties, Thailand’s robust economic indicators and the BOT’s positive outlook for the economy are expected to support the continued normalization of the policy rate, building policy space to help cushion any potential future economic shocks.
