Economists Are Almost Certain Thailand Key Rate Has Peaked at 2%

Suttinee Yuvejwattana, Bloomberg News

Tourists ride past a vendor at a floating market in Damnoen Saduak, Thailand. Photographer: Eduardo Leal/Bloomberg , Bloomberg

(Bloomberg) -- Thailand’s central bank is ready to take its foot off the pedal after driving borrowing costs to the highest in eight years, according to many economists.

The Bank of Thailand on Wednesday raised its benchmark repurchase rate to 2% and signaled a tightening bias as it flagged lingering price risks, especially from tourism-led consumption and possibly higher spending by the incoming government.

Still, overall inflation that’s already within target and the BOT further lowering its 2023 price-growth forecast convinced many that it’s time to pause.

Here’s what some institutions wrote or said after the BOT hike:

Standard Chartered Bank Plc (Tim Leelahaphan)

“We see upside risk to our terminal rate forecast of 2% and await further signals on this from the BOT; that said, we maintain our current forecast for now given political uncertainty following the recent elections”

Maybank Investment Banking Group (Lee Ju Ye, Chua Hak Bin)

The rate hike “was likely the final tightening in this cycle as inflation has already eased back to BOT’s target range. However, risk is on the upside as the committee still maintained a somewhat hawkish tone”

Kenanga Investment Bank Bhd

The repurchase rate “has reached a sufficient level to address lingering inflationary pressures and upside risk from greater demand pressures amid expanding economic activity”
“Should inflation spike, perhaps from higher energy prices or a stronger-than-expected tourism rebound, we believe the BOT has room to raise rates by another” 25 basis points

RHB Bank Bhd (Barnabas Gan)

We forecast BOT “to keep its policy rate at 2% in 2023. Our view remains unchanged,” he said, adding that “inflation has decelerated considerably since late 2022, suggesting dissipating price pressures”

Krungsri Research

“We expected the policy rate to be maintained at an 8-year high of 2% at the next MPC meeting on Aug. 2, though there are upside risks to our policy rate outlook” including better-than-expected economic data and positive political developments

HSBC Holdings Plc (Aris Dacanay)

“Given the strong growth outlook, we continue to expect the BOT to whip out one last 25 basis-point hike to bring the policy rate to 2.25% before eventually pausing its tightening cycle. We also do not expect the BOT to introduce any rate cuts until 2025”

Siam Commercial Bank’s Economic Intelligence Center:

“We expect the MPC to continue with two rate hikes in August and September, bringing the terminal rate to 2.5% in line with an expanding Thai economy and upside risks to inflation”