(Bloomberg) -- Thailand’s central bankers have a tough choice to make when they meet on Wednesday: whether to continue tightening monetary settings to counter loose fiscal policy or take a breather as inflation runs below target.

Economists are almost evenly split over the decision, with 11 of the 21 surveyed by Bloomberg expecting the Bank of Thailand to pause after having raised the one-day repurchase rate to a nine-year high of 2.25%. The rest see a quarter-point move.

“This will be a difficult decision,” Thitima Chucherd, an economist at Bangkok-based Siam Commercial Bank Pcl said. She believes there’s still room to raise borrowing costs one more time to reach the neutral rate — the level where policy is neither stimulating nor restrictive of economic growth.

At the same time, Thitima doesn’t rule out the possibility of a hold should the BOT choose to wait for more clarity regarding the new government’s fiscal policies, seen as a risk that may spur price pressures.

As part of a goal to boost annual economic growth to 5% from less than 3% in the past few years, Prime Minister Srettha Thavisin unveiled stimulus measures, including $15.5 billion in cash handouts to ramp up consumer spending. While those steps will probably buoy domestic demand in the near term, they pose a challenge for the central bank’s price stability objective.

While consumer price gains are currently below the BOT’s 1%-3% target, data for August showed inflation quickened for a second straight month. That was followed by calls from from BOT Governor Sethaput Suthiwartnarueput for fiscal conservatism, saying what the economy needs more are investment.

Here’s what to watch for in BOT’s statement at 2 p.m. local time:

Growth Outlook

Amid the softer-than-expected gross domestic product print last quarter and China’s faltering recovery, the central bank is expected to review its 2023 growth outlook of 3.6% on Wednesday. The state planning agency already lowered its full-year forecast to a range of 2.5%-3% this year.

Market participants will also look for cues on the central bank’s rate-hike cycle. Governor Sethaput has since last month repeatedly signaled readiness to pause monetary tightening amid the economy’s slowing recovery, saying that policy normalization is “approaching the landing.”

Baht Weakness

The Thai baht has weakened more than 3.5% this month, making it the worst-performer among 12 Asian currencies tracked by Bloomberg. The nation’s sovereign bonds have also underperformed, amid concerns on additional government borrowing to finance the stimulus measures. 

Still, Srettha last week said the economy has the potential to hit 6% or 7% growth toward the latter part of his four-year term, although he acknowledged that those are “challenging numbers.” He sees the weak baht helping make exports competitive and offer bargains to win over tourists.

--With assistance from Tomoko Sato.

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