MPC raised its policy rate to neutral rate of 2.5% as SCB EIC expected

The Monetary Policy Committee in Thailand raised the policy rate to 2.50% as the economy continues to recover. Growth is expected to pick up in 2024 with support from both domestic and global demand. Inflation is projected to increase next year due to economic recovery. The committee will monitor the impact of government economic policies on growth and inflation. GDP growth is projected to be 2.8% in 2023 and 4.4% in 2024, while headline inflation is expected to be 1.6% in 2023 and 2.6% in 2024. The financial system remains resilient, but credit quality for certain SMEs and households needs monitoring. Financial markets have experienced volatility due to US monetary policy and anticipation of government policies.

MPC Raises Policy Rate to 2.50%

The Monetary Policy Committee (MPC) in Thailand has unanimously voted to raise the policy rate from 2.25% to 2.50%. The committee believes that the current policy rate is appropriate for supporting sustainable long-term growth. The overall financial system remains resilient, although financial conditions have tightened somewhat. There is a need to monitor credit quality for certain SMEs and households with debt issues. Financial markets have experienced volatility, influenced by US monetary policy and anticipation of government policies.

Economic Recovery and Inflation Expectations

The Thai economy is continuing to recover, albeit at a slower rate due to weak external demand. However, growth is expected to pick up in 2024 with support from both domestic and global demand. Inflation is projected to increase next year in line with the economic recovery and El Niño-related supply pressure. The MPC will monitor the impact of government economic policies on growth and inflation. The MPC projects GDP growth of 2.8% in 2023 and 4.4% in 2024, driven by private consumption. Headline inflation is expected to be 1.6% in 2023 and 2.6% in 2024.

Resilient Financial System and Market Volatility

The MPC assesses the overall financial system to remain resilient, although financial conditions have tightened somewhat. Financial institutions maintain high levels of capital and loan loss provision. However, credit quality for certain SMEs and households with impaired debt serviceability needs to be monitored. Financial markets have experienced volatility, with rising bond yields and the baht depreciation against the US dollar, influenced by US monetary policy and anticipation of government policies. It is important to closely watch the details and implications of these policies for macroeconomic and fiscal sustainability.

Source : MPC raised its policy rate to neutral rate of 2.5% as SCB EIC expected