Poll: Bank of Thailand to keep steady policy hand as growth trumps inflation
A Ukrainian serviceman stands on top of a Russian tank captured after fighting with Russian troops outside Kyiv on Sunday. Russia’s invasion of Ukraine triggers a spike in global energy. (Reuters photo)
The central bank will not raise interest rates from a record low for more than a year in a bid to support an economy still struggling to recover from the pandemic despite a jump in inflation, a Reuters poll found.
While inflation in the tourism-dependent economy hit a 13-year high in February, driven mainly by higher energy prices, policymakers expect price pressures to be temporary.
But Russia’s invasion of Ukraine has triggered a spike in global energy and food prices that will make it harder for the Bank of Thailand (BoT) to contain inflation, as found by other central banks who until recently said high inflation was transitory.
Still, the central bank was expected to keep its policy accommodative to revive growth which has yet to return to pre-pandemic levels due to a subdued tourism recovery and tighter mobility restrictions.
All 22 economists in a March 16-25 Reuters poll predicted the Monetary Policy Committee (MPC) would leave its one-day repurchase rate at a record low of 0.50% at its Wednesday meeting. Median forecasts showed no change in rates until the second quarter of 2023.
“Under the hood of an unchanged policy rate, the MPC is likely to deliberate on rising inflationary pressures amid elevated commodity prices and supply shocks, against a backdrop of a fragile economy that is facing high uncertainties and downside risks from geopolitics and the pandemic,” said Chua Han Teng, economist at DBS.
The BoT was predicted to raise rates to 0.75% in the second quarter of next year, making it the last Southeast Asian central bank to raise interest rates.
However, there was a near split among economists with six of 13 expecting no change to rates in the second quarter of next year, indicating weak conviction about the central bank’s policy direction.
Among the remaining seven, four were in line with the median view, two expected rates to reach 1.00% with a lone voice predicting 1.25%.
“The current situation makes it increasingly difficult for policymakers to strike a balance between managing risks to economic growth and price stability,” said Somprawin Manprasert, chief economist at Bank of Ayudhya.