Economists expect the Bank of Thailand will hike interest rates for the first time in more than two years at its upcoming meeting on August 10 in a bid to tame persistently high inflation, whilst the Thai economy’s growth prospects are optimistic.
In response to inflationary pressure, Kasikorn Research Center forecasted on Monday that the Monetary Policy Committee (MPC) will hike the benchmark interest rate by 0.25 percentage points at its August meeting, bringing it to 0.75 percent.
Thailand’s inflation rate in July rose 7.61 percent on a yearly basis, slightly slowing down from 7.66 percent rise in June.
Despite a little uptick, the rate remained near a 14-year high, reinforcing expectations of an interest rate hike this week.
As accelerated inflation was largely the result of supply-side factors, rate hike may not be able to effectively address the issue. However, the increase in policy rate will reassure the public that inflation will be controlled in the future. If the rate remains too low for an extended period of time, inflation expectations may continue to rise.
In the meantime, Thailand’s economic outlook is favorable, supported by the tourism industry. In July, Thailand welcomed more than one million foreign tourists, bringing the total for the first seven months of 2022 to three million.
KResearch also anticipates that the central bank will continue to increase interest rates, beginning in August, to between 1.00 and 1.25 percent by the end of 2022.