Thailand: BoT raises the policy rate to 2.00% - UOB

Economist at UOB Group Enrico Tanuwidjaja comments on the recent interest rate decision by the Bank of Thailand (BoT).

Key Takeaways

Bank of Thailand (BOT) voted unanimously to raise the policy rate by 25bps from 1.75% to 2.00%, pushing its policy rate higher than the pre-pandemic level. BOT was not explicit in signaling the end of its rate hike cycle and seemed relatively sanguine.

BOT is more confident of stronger growth momentum ahead, of which we are less sanguine of. BOT forecasted the Thai economy to grow at 3.6% in 2023 and further accelerate to 3.8% in 2024. Full year inflation is projected to return to its 1-3% target range this year and next at 2.5% and 2.4% respectively.

We revised our view that BOT has reached its terminal rate of 2.00% and will keep it at the current level for the rest of this year. We also keep our forecast for the rate cut to start in the early part of 2024 as growth momentum may stall while inflation is coming back steadily to BOT’s target range of 1-3%.