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Thailand Monetary Policy January 2023

Thailand: Central Bank hikes rates further in January

At its 25 January meeting, the Monetary Policy Committee (MPC) of the Bank of Thailand (BoT) hiked the policy rate to 1.50% from 1.25%. The move marked the fourth consecutive increase.

The Bank decided to tighten its stance further due to still-elevated inflation and continued economic recovery. Growing tourist numbers and stronger household spending amid rising wages and employment are set to spur domestic demand. The BoT expects inflation to moderate as supply-side constraints continue to ease and prices for energy and other commodities fall globally. Upside risks to the inflation outlook stem from recovering domestic demand and pass-through from elevated production costs.

In its communiqué, the Bank reiterated that “the policy rate should be normalized to the level that is consistent with sustainable growth in the long term in a gradual and measured manner”. This implies further hikes, in line with our panelists’ expectations. Moreover, it added that due to upside risks associated with demand-side pressures, it stood ready to “adjust the size and timing of policy normalization.”

Commenting on the decision, Enrico Tanuwidjaja, economist at UOB, stated:

“Based on today’s MPC decision, we keep our view for one final 25 basis points rate hike in March to 1.75% and for BOT to hold at that level for the remainder of this year to anchor inflation expectations and arrest possible runaway inflation risks without undermining growth recovery trajectory.”

The next monetary policy meeting is scheduled for 29 March.

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