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Thailand Monetary Policy December 2021

Thailand: Central Bank holds policy rate steady at December meeting

At its 22 December meeting, the Monetary Policy Committee of the Bank of Thailand (BoT) held the policy rate at the record low of 0.50% for the 13th consecutive meeting. The decision was unanimous and was widely expected by market analysts.

The Bank decided that its accommodative monetary policy stance was still warranted, despite an improving pandemic situation and easing restrictions through December, which should reduce downward pressure on the economy. However, the Bank adopted a slightly less upbeat tone than in its November statement, noting that “the spread of the Omicron variant would be a key risk to the economic outlook and therefore warranted close monitoring” and that “the impact could be more severe and prolonged than expected due to downside risks such as the severity of the outbreak and the strictness of corresponding containment measures”. To this end, the BoT downgraded its GDP forecast for 2022 to 3.4% from 3.9% in its September report, and maintained its wait-and-see approach in order to continue supporting the economy.

In its communiqué, the Bank kept its forward guidance relatively unchanged, continuing to emphasize supporting the economic recovery and indicating that it would “stand ready to use additional appropriate monetary policy tools if necessary”. The majority of our panelists see the Bank holding rates steady throughout 2022, while some see rates rising towards the end of the year.

Analysts at Goldman Sachs are among those seeing a rate hike in 2022, commenting:

“Going forward, as core inflation pressures build only gradually, and with ‘catch up’ growth on rebounding tourism likely only in 2022, we continue to expect the Bank of Thailand to be one of the slowest central banks to hike policy rates in the region, only beginning to tighten policy in Q4 2022.”

The next monetary policy meeting is scheduled for 9 February.

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