Analysts expect BoT to maintain policy rate at meeting

A recovering domestic economy and the likelihood the US Federal Reserve might slow its interest rate cuts if inflation revives should prompt the Bank of Thailand to maintain its policy rate at its meeting on Wednesday, say analysts.
Chaiyot Jiwangkul, head of research at Krungsri Securities (KSS), said the economy has continued to rebound, thanks to increasing tourist arrivals, government budget disbursement and the 10,000-baht cash handout to vulnerable groups.
Recently released US inflation data amplified the debate on whether the Fed will opt for a smaller rate cut next month, or pause after a large September reduction of 50 basis points.
According to the US Bureau of Labor Statistics, the consumer price index rose by 2.4% year-on-year in September, exceeding forecasts of 2.3%.
“We believe the Bank of Thailand’s Monetary Policy Committee [MPC] will keep the rates unchanged at its meeting on Oct 16, preferring to first see the direction of US interest rates,” said Mr Chaiyot.
Rakpong Chaisuparakul, senior vice-president of KGI Securities (Thailand), shared this view that rates would be maintained at the MPC’s next meeting.
“As Thai GDP growth momentum looks solid in the coming quarters and the baht has weakened in recent weeks, we believe the MPC will stay put and maintain the policy rate at 2.50%,” he said.
“Our baseline view is the MPC will start cutting interest rates in early 2025.”
In the view of KSS, the MPC is expected to start trimming interest rates in the first half of 2025 when the Fed and other central banks are likely to cut their rates more aggressively than this year, said Mr Chaiyot.
Kasikorn Securities and Kasikorn Research Center (K-Research) also expect the MPC meeting this week to vote unanimously to maintain the policy rate at 2.50%.
However, the MPC is expected to be more accommodative in its monetary policy direction, signalling an opportunity to cut interest rates in the future. K-Research sees a possibility the MPC may start cutting rates as early as December 2024.
“A supporting factor for a trim in December is the Thai economic recovery is fragile and faces high risks,” the think tank said.
Although the economy is expected to grow in the second half of this year with support from rebounding exports, tourism, government spending and stimulus measures, the ongoing floods severely damaged the agricultural and tourism sectors, while consumer purchasing power has been squeezed as the global economy slows, according to K-Research.
Inflationary pressure is likely to remain low, with headline inflation in the fourth quarter returning to the lower range of the central bank’s target of 1-3%, said the think tank. Headline inflation is expected to average 0.5% this year, noted K-Research.
The monetary policy direction of major central banks is on the accommodative side, with the Fed likely to cut US rates further at the two remaining meetings this year, said the think tank.
The MPC meeting this month is scheduled to publish economic and inflation forecasts, with K-Research projecting the central bank may maintain its projections for the economy and inflation this year.
The central bank forecasts the economy to expand 2.6% in 2024, with a headline inflation rate of 0.6%. The 2025 GDP growth estimate of 3.0% could be downgraded based on increased risk factors, noted the regulator.