The MPC is expected to hold a meeting on June 8 to maintain the interest rate at 0.50%.
Date 05 Jun 2022 time 10:05
The MPC is expected to hold its meeting on 8 June to maintain the policy rate at 0.50% amid the fragile economy, while still looking at the possibility that the MPC will raise the policy rate in 4Q22.
Kasikorn Research Center estimates that the Thai economy is in a gradual recovery phase. while facing pressures from accelerating inflation and a slowing global economy. As a result, the MPC tends to continue to focus mainly on economic risks. and consider keeping the policy interest rate at 0.50% in the upcoming meeting. The main driving factor was exports that continued to expand well, although decelerating from the previous year. revival of the tourism sector as well as pent-up demand from the previous period. However, the Thai economy still faces economic risks from accelerating inflation. This will undermine the purchasing power of consumers who are originally vulnerable due to the impact of COVID-19. It was also affected by the global economic slowdown. This will affect exports in the future to face more challenges.
While the conflict between Russia and Ukraine may result in less tourist arrivals to Thailand than expected, it is likely that the Thai economy will contract from the previous quarter amid various negative factors. The MPC is likely to keep the policy rate unchanged at 0.50% at the MPC meeting. to come
while, although the MPC faces more pressure from high inflation In addition, the baht tends to depreciate in line with regional currencies.
However, there is no urgent cause at the MPC. Must hurry to raise the policy interest rate at the moment. Amid external stability, which is still considered to be at a relatively strong level, the MPC is expected to continue to consider important economic figures around the meeting. Until now, the policy rate hike will not be considered.
However, if the Fed continues to raise interest rates more than the market expected. and if inflation pressures in the country have not subsided while tourism gradually recovered Under such circumstances, the MPC may consider raising the policy interest rate as appropriate. which may be increased by 0.25% each 1-2 times at the end of the year depending on the situation
o Amid US inflation that although there is a slower direction but still remained at a high level Coupled with the Fed’s signal that it continues to weigh on inflation risks, the Fed is expected to continue raising the policy rate by 0.50% at its June meeting. and July, as signaled, while the Fed may postpone interest rate hikes at the remaining three meetings this year amid concerns about an economic slowdown. Consequently, the US policy interest rate at the end of this year is expected to be at least 2.00-225%. US inflation has not slowed, Fed will have to raise interest rates more than expected.
o Countries whose monetary policy opposing the Fed faces pressure from capital outflows and continued currency depreciation. which among the countries in the Asian region Singapore and Malaysia have already tightened monetary policy following the US. Singapore tightened its monetary policy through the policy band, while Malaysia raised its policy interest rate as the first country in ASEAN. The Bank of Malaysia raised its policy interest rate from 0.25% to 2.00% at its meeting on May 11.
o If the MPC continues to maintain an accommodative monetary policy, the spread between Thailand and other countries’ interest rates will is wider As a result, Thailand is likely to face pressure from capital outflows and the depreciating direction of the baht. which resulted in the MPC It may be necessary to give more weight to the stability risks going forward. The Kasikorn Research Center considers it possible that the MPC May need to raise the policy rate 1-2 times in the second half of this year to 0.75-1.00% amid pressure from the Fed’s tight monetary policy and Thai inflation expected to remain stable while that the Thai economy is expected to recover in the second half of the year The main supporting factor is the recovery of the tourism sector, causing the MPC to reduce its weight on economic risks. Policy at the upcoming meeting and choose to consider around the key economic figures. the meeting At the MPC meeting This time, economic and inflation projections will be published. which is possible that the MPC There will be a more positive view on the Thai economy from the trend of recovery in the tourism sector after the opening of the country that tends to be better than previously assessed. While the outlook for inflation is projected at 4.9%, it remains unchanged.