Bank of Thailand (BOT) will not raise interest rates from a record low for more than year in a bid to support the economy that is yet to recover from the pandemic shock. The move would follow despite soaring inflation.
Inflation in the tourism based economy jumped to 13-year high in February, most attributed to surging energy prices although policymakers reiterated the jump in temporary.
However, after Russia’s invasion of Ukraine has tried sharp spike in global energy and food prices which will make it harder for BOT to contain inflation.
Still, the BOT was expected to keep its policy accommodative to revive growth which has yet to return to pre-pandemic levels due to a subdued tourism recovery and tighter mobility restrictions.
According to Reuter poll between March 16-25, 22 economist predicted BOT would leave its one-day repurchase rate at record low of 0.5% at its March 30 meeting. Median forecasts showed no change in rates until the second quarter of 2023.
“Under the hood of an unchanged policy rate, the MPC is likely to deliberate on rising inflationary pressures amid elevated commodity prices and supply shocks, against a backdrop of a fragile economy that is facing high uncertainties and downside risks from geopolitics and the pandemic,” said Chua Han Teng, economist at DBS, as reported by Reuters.
The BOT was predicted to raise rates to 0.75% in the second quarter of next year, making it the last Southeast Asian central bank to raise interest rates.
“The current situation makes it increasingly difficult for policymakers to strike a balance between managing risks to economic growth and price stability,” said Somprawin Manprasert, chief economist at Bank of Ayudhya, as reported by Reuters.