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1 Jun 2023

Econ Digest

The MPC voted unanimously to raise the policy rate by 0.25% as expected, while maintaining the forecast of Thai economic growth for 2023 at 3.6%


        The Monetary Policy Committee (MPC) voted unanimously to raise the policy rate by 0.25% from 1.75% to 2.00% on May 31, 2023. The MPC deems that the Thai economy will continue to recover, driven mainly by tourism and private consumption. Meanwhile, although headline inflation is declining, it still remains at a high level. There is also a risk of demand-driven pressures arising from expanding economic activity and cost pass-through from producers to consumers due to supply pressures.   

        The MPC deems that inflation should continue to decline at a gradual pace. Headline inflation is projected to return to the target of 2.5% in 2023 and further decline to 2.4% in 2024, down from the previous projection. Additionally, the MPC projects Thai economic will grow by 3.6% and 3.8% in 2023 and 2024, respectively. However, the MPC has signaled its readiness to adjust the scale and timing of policy normalization if the evolving growth and inflation outlook deviates from the current assessment.

        KResearch views that this rate hike may be the last in this upward cycle amid a significant slowdown in inflation. Meanwhile, the Thai economy will face more risks from the global economic slowdown and uncertainties surrounding domestic political issues. Additionally, the pressure from the global trend of tightening monetary policy by central banks begins to diminish as major central banks such as the Fed begin to signal a halt to rate hikes in the near term. Therefore, the MPC may need to give more weight to economic risks, which leads to the expectation that it may stop raising its policy rate in the near term.

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Econ Digest