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Thailand Monetary Policy February 2022

Thailand: Central Bank holds policy rate steady at February meeting

At its 9 February meeting, the Monetary Policy Committee of the Bank of Thailand (BoT) held the policy rate at the record low of 0.50% for the 14th 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 amid rising inflationary risks this year. Moreover, while the Bank noted that downside risks to growth had eased, it stated that there was still “a need to closely monitor developments of the pandemic going forward”. To this end, the BoT considered that it had scope to maintain 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.

Barnabas Gan, vice president at United Overseas Bank, is among those who see a rate hike in 2022, commenting:

“In a nutshell, we expect BoT to inject a token 25 basis point rate hike in 2022, possibly as early as Q3 2022 […] in response to higher inflation risks and the faster-than-anticipated FOMC rate hike for the year ahead. Notwithstanding the projected 25 basis point hike later this year, we continue to view the monetary policy stance of BoT to be accommodative, especially against the backdrop of potentially higher global interest rates. Economic downsides remain tangible given the subdued tourism recovery and weak domestic investor demand.”

Krystal Tan, economist at ANZ, sees scope for a more delayed rate hike, noting:

“For our part, we expect the BoT to consider policy normalisation when the economy returns to its pre-pandemic size, which is unlikely to happen until late 2022, at the earliest. We believe a combination of high foreign reserves and an improving balance of payments outlook offers the BoT more scope to prioritise domestic conditions despite the global trend towards tightening monetary policies. Our baseline scenario is still for the first hike to materialise in 2023.”

The next monetary policy meeting is scheduled for 30 March.

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