It is expected that the Monetary Policy Committee (MPC) will raise its policy rate by 0.25 percent to 0.75 percent at the upcoming meeting. Amid increased inflationary pressure and steady recovery seen in the Thai economy, the MPC may gradually speed up its policy rate hikes ahead. The Thai economy is still experiencing increased pressure from runaway inflation as evidenced by a 7.61 percent YoY jump in July inflation, based on the Consumer Price Index (CPI), down from the 7.66 percent YoY recorded in June. Additionally, core inflation, excluding raw food and energy costs, accelerated to 2.99 percent YoY, against the 2.51 percent reported in the previous month, reflecting a broad-based cost transfer to consumers. Although oil prices and headline inflation have eased somewhat, increased inflation pressure in the country will likely prompt the MPC to place more weight on the inflation risk.
Looking ahead, we at KResearch, are of the view that the MPC may consider raising its policy rates gradually during the remainder of 2022. As a result, its policy rate may stand at 1.00-1.25 percent at the end of 2022. Close attention must be paid to the Thai economic performance and inflation rates. If inflation rates keep rising amid sound economic recovery, bolstered by tourism, it is expected that the MPC will consider raising its policy rate at all meetings during the remainder of 2022. However, the Thai economy may continue to experience risks stemming from a substantial slowdown in the global economy, particularly the US and China, which could in turn hurt Thai exports and tourism. Concurrently, weaker global demand may ease global inflation somewhat. Therefore, the outlook for Thailand’s policy rate during 2023 will hinge on the global economic performance, inflation and external stability amid increased geopolitical risk.