Thailand’s central bank expected to raise policy rate

The Bank of Thailand (BoT) is expected to raise its policy rate by 0.25 percentage points to 1.75%. (Photo:bangkokpost.com)

Bangkok (VNA) – The Bank of Thailand (BoT) is expected to raise its policy rate by 0.25 percentage points to 1.75% to contain inflation amid the economic recovery while trying to ease baht volatility, according to economists.

Research centres believed the central bank's move will attempt to control inflation, facilitating a smoother economic recovery via monetary policy normalisation. However, some research houses expected the central bank may weigh up managing foreign exchange rates with future rate hikes rather than inflation rate containment.

Amonthep Chawla, chief economist at CIMB Thai Bank, forecast the rate hike, to be announced at the Monetary Policy Committee's meeting on March 29, will be the last one for this rate cycle, making the terminal rate 1.75%.

Moreover, efforts to tackle the Thai baht's volatility against the US dollar will be the key objective of the increase in this round, rather than containing inflation as the inflation rate has been declining, he said.

The central bank has increased the policy rate four consecutive times, starting from August 2022, with an objective to curb higher inflation rates. Thailand's headline inflation, gauged by the consumer price index (CPI), was 3.79% year-on-year in February, decelerating for a second straight month and the lowest rate in 13 months. This followed 5.02% headline inflation year-on-year in January and 5.89% in December 2022.

The central bank assessed medium-term inflation to remain anchored within the target range at 1-3%.

Amonthep said the inflation rate is expected to return to the central bank's target framework around late April, or later in the second quarter.

Meanwhile, the Kasikorn Research Centre (KResearch), Siam Commercial Bank Economic Intelligence Centre and TTB analytics expected the central bank to raise its rate two times, in March and June, making the rate 2% by mid-year.

Thanyalak Vacharachaisurapol, deputy manager of KResearch, said controlling the inflation rate would be the key objective of the central bank's policy rate increase.

Ensuring pricing stability through both the inflation rate and foreign exchange rate is the key role of the central bank, Thanyalak noted./.