Bank of Thailand will wait for at least a year before raising interest rates from record lows to support tourism dependent economy that is hit hard by COVID-19 pandemic, according to Reuters poll.
Economic growth of the country is yet to return to pre-pandemic level and recovery looks bleak due to outbreak of the omicron.
Although inflation exceeded BOT’s target range of 1-3% in January, it is expected to fall back within target range in the coming months, with the rationale that BOT remains accommodative as long as necessary to revive growth.
All 23 economists in the Feb. 1-4 Reuters poll unanimously predicted the BOT to hold its one-day repurchase rate at an historic low of 0.50% at its Feb. 9 meeting and the rest of the year.
The central bank was expected to raise its key interest rate to 0.75% in the second quarter of 2023, followed by another 25 basis points in the December quarter of next year.
“The Bank of Thailand’s interest rate lift-off would likely only take place in early 2023 when Thailand’s real GDP returns to pre-COVID levels, assuming inflation and impact from U.S. interest rate normalisation remain manageable,” said Chua Han Teng, an economist at DBS.
“Thailand’s diverging monetary policy with the U.S. Federal Reserve could result in heightened capital flow volatility, but the BOT has more than adequate reserve buffers to deal with potential capital flow fluctuations and baht weakness.”
