BOK is expected to raise its key interest rate by 25 basis points bps on Wednesday and then hold it at that level for the rest of the year and the next, marking an end to a modest tightening cycle, a Reuters poll found.
In contrast to most Southeast Asian economies, inflation in Thailand has already returned to the central bank's target range of 1 per cent - 3 per cent, and the commerce ministry anticipates it to ease sharply in May due to a high base in 2022 and lower fuel prices.
Last month, Governor Sethaput Suthiwartnarueput said inflation risks remained and needed checking, suggesting the central bank's policy moves will be data-dependent.
A strong majority of economists polled, 17 of 22 said the BOT would raise its benchmark one-day repurchase rate by 25bps to 2.00 per cent at its May 31 meeting. The remaining five forecast no change.
If the majority of the opinion is correct, interest rates will be twice as high as before the COVID pandemic.
we expect the BOT to push through with what it telegraphed and hike its policy rate by 25 basis points to 2.00 per cent, said Aris Dacanay, the ASEAN economist at HSBC.
The possibility of potential demand-side price pressures that arise may pose an upside potential for Thailand's inflation outlook. The hope is that Thailand will exhibit punchy growth numbers in the remaining quarters of 2023. The BOT has so far raised its rates by a total of 125 basis points since August, a much more modest rate than many of its global peers, as the recovery in Thailand's tourism-reliant economy has lagged much of Southeast Asia.
Among the economists who had a longer-term outlook on rates, 11 of 20 predicted the BOT to maintain them at 2.00 per cent until at least end-year.
Of the remaining nine economists, five forecast rates will rise further to 2.25 per cent or higher by then, while four forecast no change next week and they would be held at 1.75 per cent until 2023.
Although we think the BOT will sound hawkish at the May meeting, the further drop in inflation suggests the scope for more hikes is narrowing fast, Boonnuch said.
We are more optimistic than the BOT on the economic recovery, as we think the tourism recovery will continue uninterrupted and exhibit more material improvement in H 2 when supply-side constraints ease further in Q2.