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16 Oct 2024

Econ Digest

Defying market expectations, the MPC resolved to cut the policy rate by 0.25% to 2.25%; another rate cut is likely at the next meeting if the MPC is still concerned about debt

คะแนนเฉลี่ย

        Contrary to market expectations, the Monetary Policy Committee (MPC) voted 5 to 2 to cut the policy rate by 0.25% from 2.50% to 2.25% at its meeting on October 16, 2024. This rate cut is expected to help ease the debt burden somewhat amid deteriorating asset quality, especially among SMEs and households, as their income has not fully recovered yet while also having to shoulder hefty debt. Additionally, the move reflects the MPC’s increased focus on financial stability risks.
       
        The MPC also stated that the lower policy rate remains neutral and aligns with the economy's potential. The MPC still holds the same view on economic growth as before, expecting the Thai economy to expand by 2.7% in 2024 and 2.9% in 2025. Inflation is expected to return to the lower range of the MPC target by the end of this year and is likely to remain low, partly due to structural factors. The MPC has slightly revised down its forecast for headline inflation to 0.5% in 2024 and 1.2% in 2025.
       
        KResearch is of the view that there remains a high degree of uncertainty regarding the policy rate at the next MPC meeting slated for December 2024, as it primarily depends on future events. KResearch views that another rate cut is likely at the next meeting if the MPC is still concerned about debt. However, if commercial banks reduce interest rates and if the economic and inflation trends move as expected, there is a chance that the MPC may maintain its policy rate at the next meeting. Nonetheless, the MPC will determine its policy rate mainly based on data released at the time and will have to monitor additional fiscal measures that may be launched.

        Following the MPC meeting result, the Baht weakened slightly from THB33.27/USD to THB33.38/USD, while the SET surged above 1,480 points, up from 1,467 points.

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