According to a recent poll, the central bank in Thailand is expected to leave its interest rates unchanged for the rest of 2022. This means that they will remain at a record law for the purpose of ensuring economic recovery, but calls for an earlier hike in interest rates have increased due to the inflationary risks that have surfaced. The inflation figures of Thailand for the month of April showed that it had risen by almost 4.65% because of a rise in energy and food prices. Likewise, this figure was expected to be higher than 5% in the next couple of months.
The target inflation range of the Bank of Thailand (BOT) is between 1% and 3%, but the figure has already moved past it. Even though there is a great deal of price pressure, market analysts believe that Thailand’s central bank will not tighten its monetary policy this year because it wants to support growth in the country. After there was a decline in COVID-19 infections and restrictions were eased off, the economy was able to expand by 1.1% in the quarter ending in March. This was past the expectations of a 0.9% increase.
However, the economic recovery in Thailand is likely to face a challenge in the form of low number of tourists and the zero COVID policy of China. The Bank of Thailand is scheduled for a meeting on June 8th, but the market believes that it is likely to continue with its current rate of 0.50% and will stick to it for the rest of the year as well. Economists said that while they were expecting the central bank to keep interest rates on hold for 2022, there is a possibility that policymakers could adopt a hawkish stance. This could prompt them to normalize the monetary policy in order to avoid inflationary pressures.
The hawkish stance means that the Bank of Thailand will move away from its goal of supporting the economy and focus more on controlling the rising inflation in the country. It may also want to keep up with the rate hikes that are happening globally. For now, predictions show that the first rate hike will occur in Thailand in the first quarter next year, but there is a possibility that the BOT may decide to move a bit earlier. It is possible that in the fourth quarter of this year, the Bank of Thailand decides to hike up its interest rate by 25 basis points.
This is because domestic inflation is on the rise, as is the rate-hiking trend globally. If the BOT is able to see some economic growth, it might focus more on taming inflation domestically in the next few months and withdraw the stimulus that had been issued during the pandemic. While forecast indicates that interest rates will be restored to their pre-pandemic levels of 0.75% in the first quarter next year, the predictions are between 0.50% and 1.50%, which shows that there is a lot of uncertainty regarding the policy.