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Thailand Monetary Policy March 2023

Thailand: Central Bank hikes rates further in March

At its 29 March meeting, the Monetary Policy Committee of the Bank of Thailand (BoT) hiked the policy rate to 1.75% from 1.50%. The decision marked the fifth consecutive increase and was unanimous.

The Bank decided to tighten its stance further due to still-elevated inflation and ongoing economic recovery. Growing tourist numbers and sturdier household expenditure amid increasing wages and employment are set to boost domestic demand. The BoT expects inflation to moderate as supply-side constraints continue to ease and prices for energy and other commodities decrease globally. Headline inflation is projected to return to the 1.0–3.0% target range by mid-2023, and is expected to average 2.9% and 2.4% in 2023 and 2024, respectively.

In its communiqué, the Bank reiterated that it decided to hike again “in a gradual and measured manner toward a level consistent with long-term sustainable growth”. Moreover, it added that due to upside risks, it stood ready to “adjust the size and timing of policy normalization.” This implies further hikes, in line with our panelists’ expectations.

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

“We maintain our view that BOT has reached its terminal rate of 1.75% today and will keep it at the current level for the rest of this year. We pencil in a 25 basis points rate cut to 1.50% in the early part of next year as growth is expected to slow, along with inflation coming back steadily to BOT’s target range.”

The next monetary policy meeting is scheduled for 31 May.

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