Thailand: BoT maintained its rates, as expected

Economists at UOB Group Enrico Tanuwidjaja and Sathit Talaengsatya comment on the latest BoT monetary policy meeting.

Key Quotes

As widely expected, the Bank of Thailand (BOT)’s Monetary Policy Committee (MPC) voted unanimously to keep the policy rate unchanged at 2.50% at its final meeting for 2023 on 29 Nov, citing that the current rate was appropriate in the context of ongoing economic recovery. The MPC also signaled that the policy rate would remain elevated in the periods ahead as growth was approaching its potential trajectory amid well-anchored inflation expectations within the BOT’s target range of 1% -3%.

However, the MPC became less sanguine on the outlook and further revised down its growth forecast for 2023 to 2.4% from 2.8% projected in Sep due primarily to a softer external demand and a slower-than-expected rebound of tourism compounded by China's uncertain economic recovery. In 2024, the growth projection was also revised down to 3.8% from 4.4%, including the boost of the digital wallet policy, and excluding the impact of the policy, growth was projected to expand only by 3.2%. On the inflation outlook, the headline inflation was projected to remain low at 1.3% in 2023 and 2.0% in 2024. However, if the impact of the digital wallet policy was included, headline inflation was projected to accelerate to 2.2% for 2024, compared to the previous projection of 1.6% for 2023 and 2.6% for 2024.

We maintain our view that the BOT has reached its neutral rate at 2.50% for its current rate-hiking cycle and the policy rate should stay unchanged in 2024 due to its concerns on macro-financial stability and the need to maintain sufficient policy space. In addition, the central bank reiterated the need to keep the policy rate consistent with the economic potential to achieve macroeconomic stability in the long term.

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