MPC may up Thailand's policy rate by 25 points to fight inflation
The Monetary Policy Committee (MPC) may raise Thailand’s policy interest rate by 25 basis points to 1.25% per annum when it meets on Tuesday, the Kasikorn Research Centre predicted.
KBank’s research arm said MPC was under pressure to raise the policy rate because inflation remains high even though the Thai economy is recovering.
The centre said Thailand’s headline inflation fell for a second consecutive month in October to 5.98% but was still higher than the MPC’s target.
The centre noted that while the headline inflation had dropped, October’s core inflation had risen to 3.17% year on year, indicating that the price of goods was still rising even though pressure from energy prices is easing.
The centre said the Thai economy is expected to continue improving after it expanded by 4.5% year on year in the third quarter.
“As a result, the MPC can be expected to up the policy rate again by 25 basis points,” the centre said in its analysis released on Monday.
Kasikorn Research also said that MPC’s decision on whether it would raise the policy rate again next year will depend on the rate of inflation, recovery trend and policy rate increases set by the US Federal Reserve.
The centre predicts that Thailand’s policy rate will be pushed up to about 1.75% to 2% next year.
After keeping the interest rate unchanged for more than two years during the Covid-19 pandemic, the MPC decided to increase the policy rate by 25 basis points to 0.75% in August.
The following month, it further raised the policy rate by 25 basis points to 1% per annum with immediate effect.
The MPC signalled in June that it would increase the policy rate to cool down inflation. In June, the MPC voted to maintain the policy rate at 0.50%, though three of its members wanted to boost it by 25 basis points.