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7 Jun 2024

Econ Digest

MPC Meeting, June 12, 2024: MPC expected to keep policy rate steady in a split vote, signaling no change from its previous meeting

คะแนนเฉลี่ย

        The Monetary Policy Committee (MPC) is expected to keep the policy rate steady at 2.50% in a split vote at the upcoming meeting that is scheduled for June 12, 2024, signaling no change from its previous meeting.
  • The MPC signaled at the previous meeting that the current policy rate is appropriate and necessary to safeguard macro-financial stability and preserve monetary policy space to withstand future uncertainties.
  • The Thai economy is recovering slowly due to structural problems such as loss of competitiveness, entering an aging society and high levels of household debt. However, the monetary policy is less effective in addressing structural problems that have constrained Thailand's economic growth potential.
  • The MPC is likely to prioritize financial system stability and the high volatility of the Baht, given market expectations that the US Federal Reserve (Fed) will maintain its policy rate at high levels for a longer period than anticipated.
            
        KResearch holds the view that the MPC is likely to keep the policy rate steady at 2.50% throughout 2024, even though most economists predict the MPC could cut the rate once this year. KResearch anticipates that the MPC may wait for the Fed to make the first move. Thailand’s economic growth is expected to accelerate in the second half of 2024 due to the continued recovery in tourism and acceleration in government spending. Meanwhile, exports will continue to grow following global trade and the low base of the previous year, although the exports are likely to grow at a slower pace, and there is also uncertainty surrounding government stimulus measures. Headline inflation in the country is set to return to the BOT’s target range of 1-3% by the end of this year amid pressures from global energy prices and domestic agricultural product prices affected by extreme weather conditions, although demand-driven inflationary pressure remains low. Furthermore, the pressure on the Baht to depreciate due to the Fed’s tendency to maintain high interest rates longer than expected is another factor supporting the MPC’s inclination to maintain the policy rate at 2.5% throughout the year.

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