Thailand central bank seen to hold rates in Sept after 7 straight hikes

BENGALURU  – Thailand’s central bank will leave its key policy rate unchanged at 2.25 percent on Wednesday and likely through 2024, marking an end to a year-long tightening cycle, according to a Reuters poll, though a few economists still expect one final hike.

Despite inflation in Thailand edging up slightly to 0.88 percent in August, it remained below the central bank’s 1-3 percent target range for a fourth consecutive month, suggesting little need for the Bank of Thailand (BOT) to continue hiking.

Governor Sethaput Suthiwartnarueput recently said both economic growth and inflation were expected to be lower than previously forecast due to softer tourism spending and a weak economic outlook for China, the country’s major trading partner.

READ: Thai central bank sees 2023 GDP growth, inflation lower than expected

A strong majority of economists in a Sept. 18-22 poll, 21 of 27, expected the BOT to keep its benchmark one-day repurchase rate at 2.25 percent on Wednesday. Only six forecast another quarter-point hike to 2.50 percent.

“The BOT will switch to a wait-and-see mode. It is actually in a relatively comfortable position to take its time in terms of making its policy decisions because growth is strong, inflation is low,” said Lavanya Venkateswaran, senior Asean economist at OCBC.

“We don’t see inflation coming back to within BOT’s target for the rest of this year at least, and possibly even in Q1 next year … so I don’t think in the near term there’s a need to rush into further hikes.”

None expected the central bank to raise interest rates at the following meeting in November. Median forecasts showed interest rates remaining at 2.25 percent through next year.

However, there was a split among those with a longer-term view on rates, with 47 percent of economists, nine of 19, expecting the BOT to keep rates at 2.25 percent until end-2024, while six predicted another hike to 2.5 percent, and four anticipated a cut — three to 2 percent and one to 1.75 percent.

“Despite growth slumping … it’s clear the BOT is determined to raise rates at least one more time to reach its estimated neutral rate,” noted Aris Dacanay, Asean economist at HSBC.