HSBC foresees policy rate hike in Q4

 

 

 

 

 

The economic house believed that Thailand is geared towards the 5.5 per cent growth rate this year. With that in sight, it expects the policy rate to be jacked up by 25 basis points in the last quarter to 3.25 per cent, and another quarter increase in the first quarter of next year.

The Bank of Thailand's Monetary Policy Committee will convene on May 2. 

It noted that minimum wage hikes could pose supply constraints and the burden might eventually fall on consumers in the form of higher prices.

"Note that we do not expect a very big direct impact on account of minimum wage policy. The increase will likely be mitigated by steady migration of cheap labour, given Thailand’s large informal sector. Still, to the extend that this adds purchasing power to households, there will be an inflation impulse," it said.

HSBC noted that at the May 2 meeting, the BOT will have the assurance that "the domestic economy is on the mend and further monetary accommodation is no longer required. Global economic conditions, though not much different since its last meeting, will remain a point of consideration, given the weak data releases from Europe".

It is convinced that an expected 7 per cent growth in government expenditure for the 2012 fiscal year, plus the multiplier effect expected through Bt900 billion off-budget spending will be enough to propel the economy, despite of slow down in the West. Thailand, in short, is relatively immune this year to external headwinds. 

"The next move, in all likelihood, will be up as inflation rears its head. Higher wage costs and more importantly, accelerating domestic demand will ultimately push up core prices, which the central bank targets. Moreover, the BOT has been accommodative with negative real interest rates for a long time now."

 

In another research, Siam Commercial Bank's Economic Intelligence Centre (EIC) is convinced that the policy rate would remain unchanged until end of this year, though it revised up the economic growth forecast to 5.6-5.8 per cent this year and expected headline inflation to remain at 3.5-4 per cent. Despite higher oil prices, the centre expected the core inflation, which does not take into account volatile energy and food prices, to remain within target.