Thailand: Steady policy rate given ‘appropriate’ stance
BOT to keep rates unchanged in 2024.
Group Research - Econs, Chua Han Teng30 Nov 2023
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The Bank of Thailand (BOT) unanimously maintained its policy rate at 2.50% during its Nov 29 meeting. We maintain our view for steady interest rates in 2024, taking cues from policymakers’ rhetoric. After 200bps worth of hikes since Aug 2022, the BOT Monetary Policy Committee (MPC) paused for the first time, assessing the policy stance as neutral. It continued to view the current policy rate as ‘appropriate for supporting long-term sustainable growth’. This was also seen from three other aspects: 1) keeping inflation sustainably within the 1-3% target range, 2) ensuring long-term macro-financial stability, and 3) having sufficient policy space given the uncertain outlook. Assistant Governor Piti Disyatat said that ‘the rate will probably remain at the current level for a while’ in a briefing following the decision.

The BOT’s policy rate hold was accompanied by updated forecasts. On growth, we view the BOT’s outlook as positive, given the continued recovery trajectory, despite lowered 2023 and 2024 growth projections after 3Q23’s growth disappointment. The BOT is expecting continued tourism recovery and goods exports expansion in 2024, in line with our expectations. The government’s digital wallet scheme is estimated to add 0.6 percentage points to 2024’s growth, if implemented. On inflation, the BOT is expecting a pick-up in 2024, in line with the economic recovery and El Niño-related supply pressure, but staying within its 1-3% target range, even if the digital wallet policy is rolled out. The BOT is monitoring upside commodity-related price risks. They include higher food prices due to El Niño and rising global energy prices due to the Middle East conflict. Demand-side price risks have dropped off the radar for now, probably given 2023’s weaker-than-expected growth recovery.

Chua Han Teng, CFA

Economist - Asean
[email protected] 

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