KResearch views that there is a greater chance that this year's last meeting of the Monetary Policy Committee (MPC) will resolve to increase the policy interest rate by 0.25 percent after some signals were clearly sent by the committee on the necessity to rebalance the monetary policy in order to enlarge the policy space in the future. While the Thai economy has begun to exhibit its fragility, its growth remains healthy in spite of slight disruptions in the third quarter of 2018. Against this backdrop, risks associated with fragile economic stability should be minimized and the policy space should be strengthened to cope with any future risk factors. As concerns the Thai Baht movements, Thailand's interest rate increase is unlikely to shore up the Thai Baht value significantly because the Thai Baht movements are partially influenced by the USD and risk factors related to the global economy.
Effects on the Thai economy: Amid high liquidity of the Thai monetary market, the results of an interest rate hike that will be passed on to financial costs are expected to be contained within a limited level. Meanwhile, commercial banks' interest rate increases may rely upon their assessment of other financial factors, in addition to the matter of financial costs, such as debtors' debt repayment capability and credit demand. KResearch holds the view that the MPC make take time for evaluation of the economic conditions and related risk factors before coming up with a new financial stance. Therefore, this interest rate hike of the MPC could be made in a non-continual fashion.