Thailand's central bank has opted to maintain the interest rate at 2.50 percent for the fourth consecutive meeting, as inflation aligns with the target range. Despite governmental pressure to reduce rates to bolster economic growth, the Bank of Thailand's Monetary Policy Committee (MPC) voted 6-1 to uphold the current rate.
The MPC majority believes that the existing policy rate supports the economy's trajectory towards its potential, while also preserving macro-financial stability. Notably, one of the seven committee members advocated for a 0.25 percentage point rate cut, citing the economy's reduced growth potential amid structural issues and the need to ease borrowers' debt burdens.
Gareth Leather, an economist at Capital Economics, noted, "The central bank's tone has led us to postpone our forecast for a rate cut until the October meeting, despite the economy's weakness and very low inflation likely prompting a policy loosening later in the year."
Recent data indicates that Thailand's consumer price inflation rose to 1.54 percent in May, up from 0.19 percent in April, thus falling within the target range of 1.0 to 3.0 percent. The bank anticipates that inflation will rise further as the domestic diesel price subsidy and surplus of certain raw food items diminish.
Projected headline inflation is set at 0.6 percent for 2024 and 1.3 percent for 2025, while core inflation is expected to be 0.5 percent and 0.9 percent for the same respective years. The bank forecasts that overall headline inflation will return to the target range by the fourth quarter of 2024, with medium-term inflation expectations remaining aligned with the target.
Thailand's economy grew by 1.5 percent in the first quarter year-over-year, fueled by household consumption and increased tourist arrivals. Future economic expansion is forecasted at 2.6 percent for 2024 and 3.0 percent for 2025.
The central bank underscored that the current policy rate is appropriate for enhancing growth and the inflation outlook while supporting long-term macro-financial stability. The bank's statement emphasized the importance of monitoring economic developments, particularly the recovery of exports and the impact of government measures.
