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25 Sep 2023

Econ Digest

MPC meeting, September 27, 2023: The MPC is expected to maintain policy rate at 2.25%, while leaving the door open for future rate hikes


        It is expected that the Monetary Policy Committee (MPC) will keep its policy rate steady at 2.25% during its upcoming meeting slated for September 27, 2023. This is due to the slowing growth momentum seen in the Thai economy, as reflected in the lower-than-expected GDP growth in 2Q23, while both headline and core inflation rates have remained below the MPC’s targets of 1-3%. Looking ahead, it is expected that the Thai economy will continue to face the risk stemming from the global economic downturn, which may in turn pressure Thai exports and the recovery in tourism over the future. Given this, the MPC will likely resolve to maintain its policy rate at its upcoming meeting.   
        In spite of this, KResearch views that the MPC may continue to keep the door open for future rate hikes. Based on signals at previous meetings, the MPC is still concerned that rising food costs could again lead to accelerated inflation, and the fact that global crude oil prices will likely stay at an elevated level as OPEC+ is expected to limit oil production amid concern about a global economic downturn. Additionally, the MPC will continue to face pressure from the substantial decline in the Baht. As a result, the MPC may signal future rate hikes at its upcoming meeting.
        Looking ahead, KResearch is of the view that the MPC will likely end its upward interest cycle and hold its policy rate at 2.25% until at least the end of 2023. Although inflation is set to increase in line with global food and energy prices, government measures aimed at reducing the cost of living for consumers are expected to ease inflationary pressures to a certain extent. Inflation is projected to remain within the MPC's target of 1-3%. Amid a slowdown in economic recovery momentum, the MPC will continue to face restrictions in raising its policy rates. KResearch, therefore, views that the MPC will likely keep its policy rate steady at 2.25% until at least the end of 2023.

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