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14 Aug 2024

Econ Digest

MPC meeting, August 21, 2024: The decision to maintain the policy rate is expected to be non-unanimous, while a rate cut is more likely during the remainder of 2024

คะแนนเฉลี่ย

        It is expected that the Monetary Policy Committee (MPC) meeting will reach a non-unanimous decision to maintain the policy rate at 2.5% during the upcoming meeting slated for August 21, 2024, due to the following factors:

  • The MPC signaled in the last meeting that the current interest rates are already in line with the improving economic and inflation outlook and are conducive to its efforts in maintaining long-term economic and financial stability. Additionally, the current interest rates can accommodate both upside and downside risks to a certain extent.
  • The Thai economy is set to recover slowly due to structural issues such as the loss of competitiveness, the transition towards an aging population, and hefty household debt. The current monetary policy has limited effectiveness in addressing these structural problems, causing the Thai economy to grow below its potential.

        KResearch, therefore, continues to assess that the MPC will keep its policy interest rate at 2.50% during the remainder of 2024, although it may cut the policy interest rate once in 4Q-2024, due to the following reasons:

  • The US Federal Reserve (Fed) may cut the policy interest rate more than previously expected. Markets anticipate that the Fed might trim interest rates by up to 100 basis points this year after the labor market and inflation figures showed lower-than-expected growth, which would cause the US dollar to weaken and the Thai Baht to strengthen.
  • The Thai economy is likely to experience a fragile recovery amid increased risks from sluggish domestic demand, as reflected by steady declines in the Private Consumption Index (PCI) and the Consumer Confidence Index.
  • Inflationary pressure is likely to remain low, even though headline inflation is expected to approach the Bank of Thailand's target of 1-3% in 4Q-2024, due partly to the low base of last year. KResearch maintains its projection for the average headline inflation rate for 2024 at approximately 0.8%.

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