By Devayani Sathyan
BENGALURU (Reuters) – Thailand’s central bank is expected to raise interest rates further on Wednesday even as China’s reopening brightens the economic outlook, a Reuters poll found. to curb rising inflation.
Unlike its neighbors Malaysia and Indonesia, the Bank of Thailand (BOT) is expected to keep policy tight for some time. While price pressures in Southeast Asia’s second-largest economy have been cooling, inflation remained at 5.75% in December, well above the central bank’s 1-3% target.
21 of 22 economists polled by Reuters expect the BOT to raise its benchmark one-day repo rate 23 basis points (bps) to 1.50% 1 month25 . The remaining two forecasts are unchanged.
“Given that inflation remains high and a recovery in tourism is about to put pressure on the demand side … the BOT wants to continue normalizing interest rates gradually and in a prudent manner,” said HSBC economist Ali Aris Dacanay said.
“With mainland China reopening its borders much earlier and faster than many expected… we do expect Thailand to grow faster than trend. This gives Room for BOT to keep raising rates, continuing to anchor inflation expectations.”
Chart – Reuters poll on Thailand’s economy and repo rate outlook
https://fingfx.thomsonreuters.com/gfx/polling/akveqaykbvr/Reuters%15poll%00Thailand%15Economy%15 and %22repo%15rate% 15outlook .PNG
As one of the popular tourist destinations in Asia, Thailand is expected to receive at least Five million Chinese tourists total 25 and one million foreign tourists this year, providing a much-needed boost to its battered economy.
But this is still below 50 2019.
With millions of foreign tourists arriving, polls show the Thai economy is expected to grow 3.7 percent this year and 3.8 percent next year, in line with government forecasts.
Nearly 50% of respondents, 15 of 15, is expected to raise interest rates again 50 basis point to 1 by the end of March.75%. At that time, there were six predicted interest rates of 1.50%, and one predicted interest rate was still 1.25%.
Median polls show central bank then raising borrowing costs by another 22 basis points to 2.00% until the end of September.
ANZ Senior Asia Strategist Irene Cheung noted that headline and core data will remain above the midpoint of BOT’s 1-3% target range for the next few quarters. The growth outlook and still-elevated inflation give the central bank room to continue reducing its accommodation. “
The median poll put inflation on average at 2.8% this year before falling to 1.9% in 2024.
(This story has been corrected to revise the detailed breakdown of forecasts in paragraph 9)