Central Bank stands pat in February in split vote

At its 7 February meeting, the Monetary Policy Committee of the Bank of Thailand (BoT) kept the policy rate unchanged at 2.50%. The decision was not unanimous for the first time in nine meetings; five members voted to stand pat, but two voted for a 25 basis point cut.

Muted price pressures and momentous domestic demand were behind the Bank’s pronouncement. Meanwhile, the BoT sees inflation stabilizing at around 1.0% in 2024 before picking up in 2025 amid recovering activity but lower-than-previously-expected commodity prices; the Bank’s target range for inflation is 1.0–3.0%. With regard to activity, the BoT projects GDP to expand between 2.5% and 3.0% this year, but it warned that “structural impediments, particularly deteriorating competitiveness, would increasingly hamper growth in the absence of structural reforms”.

In its forward guidance, the Bank stated that its current monetary policy stance “remains consistent with sustaining growth while fostering macro-financial stability in the longer term”. It noted heightened economic uncertainty and stated that future decisions would depend on the outlook for growth and inflation. Our panelists expect interest rates to decline somewhat this year as the Bank seeks to sustain the economy amid moderate inflation. The next meeting will take place on 10 April.

Commenting on the likely future path of monetary policy, United Overseas Bank’s Enrico Tanuwidjaja and Sathit Talaengsatya stated: “According to the latest policy decision, we maintain our view that the BoT is likely to keep the rate unchanged at 2.50% throughout 2024 due mainly to its concerns on macro-financial stability and [the] limited roles of monetary policy to address sluggish growth dragged by structural challenges.”

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