At its Meeting on 27 Sep 2023, the Bank of Thailand (BOT)’s Monetary Policy Committee (MPC) voted unanimously to raise the policy rate by 25bps from 2.25% to 2.50% in line with our earlier expectation, pushing its policy rate to reach a decade-high and much higher than the pre-pandemic level. The MPC also signaled the end of the current rate hike cycle citing that the current policy interest rate was appropriate for supporting long-term sustainable growth. 

The MPC revised down its growth forecast for 2023 to 2.8% from 3.6% previously projected in May due to subdued global growth and China's economic woes weighing on Thailand’s exports of goods and tourism, while growth projection for 2024 was revised up to 4.4% from 3.8%. On the inflation outlook, the headline inflation was projected to stabilize within the target range of 1-3%, slowing to 1.6% in 2023 and rebounding to 2.6% in 2024, compared to the previous forecasts of 2.5% and 2.4% for 2023 and 2024, respectively. 

We reiterate our view that the BOT has reached its terminal rate at 2.50% for its current rate-hiking cycle and we view that the policy rate should stay unchanged for the rest of 2023 and for a good part of next year. The MPC’s final meeting schedule for this year is on 29 Nov 2023. We therefore revise our view and now forecast the BOT to keep the policy unchanged through 2024 due to its concerns on macro-financial stability, particularly the household debt overhang.