It was widely anticipated by the market that the Bank of Thailand’s Monetary Policy Committee (MPC) would increase the key policy rate by 25 basis points, bringing it to 1.50%, in order to combat inflation.
To tackle above-target inflation and soften the blow to its economic recovery from rising global headwinds, the MPC, which is scheduled to meet later today (Jan. 25), decided unanimously on November 30 to raise the interest rate by 25 basis points for a third straight meeting, to 1.25%.
On Tuesday, Kasikorn Research Centre (KResearch) stated that the reopening of China’s borders sooner than predicted would assist the Thai economy recover from the pandemic.
However, inflation remains a threat to the economy, the center warned, noting that headline inflation in December rose to 5.89% while core inflation remained unchanged at 3.23%.
In order to keep inflation in 2023 within the target range of 1-3%, KResearch predicted that after the revision in January, the MPC will raise the interest rate by another 25 basis points to 1.75% during the first quarter of the year, and hold the rate until the end of the year.
Reuters poll of economists also expected Thailand’s central bank to raise interest rates by 25 basis points at its forthcoming meeting, with additional rate hikes probable despite the improvement in the economic outlook brought about by China’s reopening.
The BOT is widely anticipated to maintain its monetary policy tightening for a longer period of time than its neighbors like Malaysia and Indonesia. Although there has been an easing of pricing pressures in Thailand, inflation in December was still 5.89%, which is significantly beyond the central bank’s 1-3% target.
Stocks in the banking sector are expected to rise ahead of the BOT’s anticipated rate hike by 25 basis points, say market watchers.