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1 Dec 2022

Econ Digest

The MPC has raised its policy rate by 0.25%, which is expected to peak at 2.00% in 2023


        The Monetary Policy Committee (MPC) voted unanimously to raise its policy rate by 0.25% from 1.00% to 1.25% at the meeting on November 30, 2022. The Committee deems that a gradual increase in the policy rate remains the appropriate course for monetary policy, given that the economy will continue to grow following the support of tourism and private consumption. While the headline inflation is expected to decline and return to the target range within 2023, the MPC has revised up its headline inflation projection for 2023 from 2.6% to 3.0% mainly on the back of the upward adjustment of electricity charges. Meanwhile, the MPC’s economic projection remains close to its previous assessment of 3.2% for 2022 and 3.7% for 2023, but the MPC deems that the global economic outlook remains highly volatile and may slow down more than expected.

        KResearch views that the MPC will continue to gradually raise the policy rate in the first half of 2023 with Thailand’s policy rate likely to peak at 1.75-2.00%. Inflationary pressures may begin to wane amid growing economic risks from the slowing global economy during the second half of 2023, prompting central banks around the world, including the Fed, to give more weight to economic risks. The Fed will likely slow its interest rate increases at its subsequent meetings and may stop raising rates by the first half of next year, which would help reduce pressure on the MPC to maintain monetary stability. However, there is still a risk that inflation could stay high and the Fed may keep raising rates more aggressively than expected, which could lead to pressure on the MPC to raise its policy rate more than expected.

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