Thailand Seen to Deliver One More Rate Hike Next Week Then Pause

Thailand’s central bank may raise the policy rate one last time at the end of the month after a steady pace of tightening since August helped bring inflation back to target in less than a year, according to analysts.

(Bloomberg) — Thailand’s central bank may raise the policy rate one last time at the end of the month after a steady pace of tightening since August helped bring inflation back to target in less than a year, according to analysts.

The Bank of Thailand will probably lift its benchmark rate by a quarter-point to 2% on May 31 and then maintain the rate in the foreseeable future, according to the median estimate of 26 economists in Bloomberg’s latest quarterly survey. While the projected peak rate was unchanged from the previous poll, analysts now see that the BOT will wind down its tightening this quarter instead of next.

Since Thailand’s economy will be supported by the recovery in tourism and China’s reopening, the BOT has room to deliver one more rate increase and then pause for the rest of the year, said Poon Panichpibool, a strategist at Krung Thai Bank. 

Headline inflation has eased every month since January, returning to within the BOT’s 1%-3% target in March. Still, Governor Sethaput Suthiwartnarueput refrained from declaring victory on prices, keeping policy normalization in play even after 125 basis points of increases in five moves since August.

Despite Thailand’s recovery momentum, analysts forecast economic growth to stay below 4% through 2025 while inflation is projected to cool to an average of 1.9% next year from an estimated 2.6% in 2023, according to the latest survey.

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