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28 Nov 2022

Financial Institutions

MPC meeting, Nov. 30, 2022 Policy likely to be raised by another 0.25% to 1.25% amid elevated inflationary pressures while economic recovery is on track (Business Brief No.3982)


        It is expected that the Monetary Policy Committee (MPC) will raise its policy rate by another 0.25 percent to 1.25 percent at its final meeting of 2022 amid mounting inflationary pressures while the Thai economy is set to recover gradually ahead. Thailand's headline inflation in October fell for the second consecutive month, but remained above the MPC's target. Meanwhile, core inflation increased slightly over month, reflecting that the overall product prices continue to accelerate. Inflationary pressures stemming from fuel prices began to ease while the Thai economy is projected to rebound steadily after the Thai economy grew 4.5 percent YoY during 3Q22. The MPC may, therefore, consider raising its policy interest rate by another 0.25 percent at the upcoming meeting. It is expected that the MPC will gradually hike its policy rates as earlier signaled. Meanwhile, pressure from currency-related issues has begun to decline after the Baht has strengthened in line with the weakening of the US dollar.
        Looking into 2023, it is expected that the MPC's decision to raise its policy rates will depend on inflationary pressures, continuity of the economic recovery, and the directions of policy rate increases of leading central banks such as the US Federal Reserve (Fed). There is a possibility that the MPC will slow its policy rate hikes. Thailand's policy rate may peak at around 1.75-2.00 percent in 2023 amid additional economic risks, including the slowing global economy. Meanwhile, inflationary pressures may begin to subside, prompting central banks around the world, including the Fed, to give more weight to economic risks. The Fed will likely be less aggressive in its interest rate hikes at its subsequent meetings and stop raising rates by the first half of next year. As a result, there would be fewer factors supporting the US dollar, and this in turn may cause the Baht to strengthen, helping reduce pressure on the MPC to maintain its stability. Given additional economic risks, coupled with easing pressures from inflation and currency, it is expected that the MPC will place emphasis on economic risks and may also delay or even stop raising rates within 2023.  

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Financial Institutions