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Thailand Monetary Policy March 2022

Thailand: Central Bank holds policy rate steady at March meeting

At its 30 March meeting, the Monetary Policy Committee of the Bank of Thailand (BoT) held the policy rate at the record low of 0.50% for the 15th consecutive meeting. The decision was unanimous and was widely expected by market analysts.

The Bank decided to stick to an accommodative monetary policy stance as it prioritizes supporting the economic recovery

and considers recent inflation increases as driven by cost-push factors rather than demand-pull inflationary pressures. The Bank highlighted protracted key downside risks to the outlook, including raw material shortages and higher living costs, revising down its GDP growth outlook for 2022 to 3.2% from 3.4%. Meanwhile, it revised its inflation forecast for this year up strongly to 4.9%, from a previously estimated 1.7%.

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 envision a rate hike in 2022:

“In a nutshell, we continue to expect BOT to inject a token 25 basis point rate hike in 2022, possibly as early as Q3 2022. Should this come to pass, this would be in response to higher inflation risks and the faster-than-anticipated FOMC [the U.S. Federal Reserve] rate hike for the year ahead. However, as discussed, we recognise that BOT is likely prioritising growth over inflation, and thus, may potentially delay its rate hike decision to 2023 should downside risks to economic growth persist for the rest of this year.”

The next monetary policy meeting is scheduled for 8 June.

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