Bank of Thailand Holds Interest Rate Steady at 2.5% Amid Inflation Concerns

[webfact]

 

The Bank of Thailand is anticipated to maintain the benchmark interest rate at 2.5% in its forthcoming meeting, responding to the gradual rise in inflation back within its target range. Experts are calling for more government stimulus, alongside existing digital wallet schemes, to invigorate the sluggish economy.

 

Headline inflation edged up to 0.8% last month, exceeding the consensus estimate of 0.7% and June's 0.6% rise. This nearing alignment with the central bank's inflation target range of 1-3% was highlighted by Maybank economists in Kuala Lumpur.

 

Core inflation also rose, hitting 0.5% from June’s 0.4%, marking a peak in six months, according to Erica Tay, Maybank’s Director of Macro Research.

 

“The phasing out of electricity subsidies in the latter half of 2024 could drive headline inflation higher. We project the consumer price index (CPI) to average 0.9% this year, rising to 1.8% next year,” Tay elaborated.

The central bank remarked, “Consumer confidence continues to wane due to higher living costs from rising energy prices and concerns over the tepid recovery of the Thai economy.”

 

Tourism remains vital, with tourist arrivals hitting 21 million year-to-date, a 33% year-on-year increase, as per Tay’s insights.

 

With the CPI gradually climbing back to the target range and a forecasted increase in public spending in the latter half of the year, the Bank of Thailand is less likely to reduce its policy rate at the August 21 meeting, as noted by Maybank.

 

Looking ahead, Maybank predicts a rate cut of 0.25 percentage points to 2.25% next year, maintaining their GDP growth forecasts at 2.4% for this year and 2.8% for 2025. 

 

The Bangkok Post reports that Bank of America (BoA) noted Thailand’s July CPI aligned with expectations but was slightly above the consensus forecast due to rising oil and food prices.

 

BoA's Pipat Luengnaruemitchai stated, “Thai inflation remains relatively low year-on-year compared to regional countries. We foresee a minor dip in August inflation due to the base effect but anticipate a rise above 1% in Q4 due to last year's low energy price base.”

 

Economists like Nattaphon Khamthakruea from Yuanta Securities and Amonthep Chawla from CIMB Thai Bank expressed concerns that economic growth may dip below 2% this year, especially depending on the imminent Constitutional Court ruling regarding Prime Minister Srettha Thavisin. They advocate for immediate stimulus measures to boost the economy.

 

TOP: Bank of Thailand. Picture courtesy: MGR online

 

-- 2024-08-09

 

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[lordgrinz]

LOL.....Srettha mut be foaming at the mouth.

[CallumWK]

51 minutes ago, webfact said:

The phasing out of electricity subsidies in the latter half of 2024 could drive headline inflation higher.

 

I thought that was off the table already, and declared as being fake news by a minister.

[Will B Good]

44 minutes ago, lordgrinz said:

LOL.....Srettha mut be foaming at the mouth.

 

 

My thoughts as well....but maybe this non-move has been sanctioned by Thaksin......so it will suddenly be okay.

[hotchilli]

2 hours ago, webfact said:

Experts are calling for more government stimulus, alongside existing digital wallet schemes, to invigorate the sluggish economy

Very short term thinking, but then this is the nation of short term.

[koolkarl]

Yet you are lucky to get 1% per annum on a term deposit which leaves a whopping 1.5% spread.  Banks are making money like no tomorrow.

[CallumWK]

9 minutes ago, koolkarl said:

Yet you are lucky to get 1% per annum on a term deposit which leaves a whopping 1.5% spread.  Banks are making money like no tomorrow.

 

While it is still not much, I get between 1.8 and 2.25% on all my deposits with Thai banks. Most of them aren't term deposits either, and are always accessible.