Bank of Thailand (BoT) voted unanimously to raise the policy rate by 25bps from 2.00% to 2.25%, pushing its policy rate to reach almost a decade-high and much higher than the pre-pandemic level. Based on yesterday’s MPC statement, BoT seemed to remain relatively hawkish. 

BoT is more confident of stronger growth momentum ahead, of which we are less sanguine of (UOB GDP growth forecast for 2023: 3.1%, 2024: 3.5%). Thai Finance Ministry has recently downgraded its growth projection from previous 3.6% to 3.5% for 2023 while there was no specific mention of its latest GDP growth forecast from BoT based on yesterday’s MPC. Inflation is projected to return to its 1-3% target range this year and next year and BOT expects inflation to rebound in 2H23. 

We revised our view now that BoT will only likely reach its terminal rate of the current rate hike cycle in Sep at 2.50%, thus we expect another final rate hike of 25bps next month and will keep it at that level for the rest of this year. We also keep our forecast for the rate cut to start in the first semester of 2024 as growth momentum may stall while inflation is expected to be well entrenched within BoT’s target range of 1-3%.