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23 May 2023

Financial Institutions

MPC meeting on May 31, 2023 MPC is expected to raise its policy rate by 0.25 percent to 2.00 percent – possibly the last rate hike in this cycle (Business Brief No.4004 Full Ed.)

คะแนนเฉลี่ย

        The Monetary Policy Committee (MPC) is expected to raise its policy rate by 0.25 percent to 2.00 percent at its upcoming meeting on May 31, 2023. This is potentially the last rate hike in this economic cycle. However, the committee signalled in its previous meeting that rate rises may continue amid elevated inflation risks due to ongoing recovery in domestic demand, along with uncertainties over cost pass-through from producers to consumers, and future trends in energy prices and commodity goods. These factors contribute to the likelihood of the MPC raising the rate at its meeting on May 31, 2023, as earlier signalled. Nevertheless, a significant decline in inflation, increased economic risks from domestic political uncertainties and the global economic slowdown, and easing of monetary policy by several central banks worldwide following the US Federal Reserve (Fed)’s signal to pause rate hikes soon may lead the MPC to give more weight to economic risks and perhaps stop raising its policy rate in the near term.

        Looking ahead, KResearch holds the view that the MPC will likely maintain the interest rate at 2.00 percent for the rest of 2023 if the Thai economy continues its sustained recovery in the second half of the year, as anticipated. However, the Baht remains susceptible to volatility. The Thai currency is expected to receive support from a projected current account surplus amid the recovery of the tourism sector. But uncertainties surrounding the formation of a new government could exert downward pressure on the currency. Meanwhile, the US Dollar may see support if the Fed continues its policy rate hikes, contrary to market expectations, due to persistently high inflation and a strong labor market. Additionally, demand for safe-haven assets such as the US Dollar amid increasing global economic risks may also contribute to the currency’s strengthening.

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Financial Institutions

Monetary Policy Committee