The Monetary Policy Committee (MPC) voted unanimously to raise the policy rate by 0.25% to 2.50% on September 27, 2023, contrary to market expectations. The MPC reasoned that the Thai economy continued to recover. Meanwhile, the MPC still sees upside risks to inflation, particularly next year, due to the government’s policies, especially the digital wallet scheme, that require massive funds. This is reflected through the upward revision of inflation and economic forecast for next year. Under this context, the MPC decided to continue hiking the interest rate in order to maintain policy space to accommodate uncertainties going forward.
Besides the said factors, KResearch sees that this round of the MPC’s interest rate hike is due to concerns about the financial stability of the Baht’s value, which has depreciated by more than 6% since the beginning of August 2023, making it the weakest currency among its peers.
However, the MPC’s statement stated that, following the gradual normalization of policy prior to this meeting, the current policy interest rate was appropriate for supporting long-term sustainable growth. It reflects that this round of interest rate increase will probably be the last in the current rate hike cycle.
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