Thai central bank to keep rates on hold until end of 2022, calls for an early hike grow louder: Reuters poll

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By Devayani Sathyan and Anant Chandak

BENGALURU (Reuters) – Thailand’s central bank will leave interest rates unchanged at record lows for the rest of the year to support the economic recovery, but calls for an early rate hike are growing. more hear in a context of inflationary risks, according to a Reuters poll.

Driven by rising food and energy prices, inflation in Thailand hit 4.65% in April and is expected to remain above 5% in the coming months, well above the target range for 1% to 3% Bank of Thailand (BOT).

Despite these price pressures, economists expect the central bank to maintain accommodative policy to support growth until the end of 2022.

After a drop in COVID-19 cases and an easing of restrictions, Thailand’s economy grew by a seasonally adjusted 1.1% in the March quarter from the previous three months, beating an expected increase of 0, 9% in a separate Reuters poll.

But China’s zero-COVID policy and weak tourist arrivals still pose a challenge to recovery.

The 20 economists in the May 30-June 3 poll predicted the central bank would hold its overnight repurchase rate at 0.50% at its June 8 meeting and hold it at that level for the rest of the month. year.

“While our baseline view is that the Bank of Thailand (BOT) remains on hold in 2022, we see growing risks that policymakers will change course and normalize monetary policy in 2H22, amid inflationary pressures. on the rise,” said Chua Han Teng, an economist at DBS. .

“By ‘hawkish shift’, we specifically mean the scenario where the BOT explicitly shifts its focus from economic support to containing inflation or tracking global rate hikes and signals that rate hikes would be imminent in 2H22. “

MOVE EARLIER

While the poll’s median forecast showed that the first rate hike would not come until the first quarter of 2023 – unchanged from the April poll – some economists expected an earlier decision from the BOT.

More than a third, or seven of the 20 respondents, forecast at least a 25 basis point rate hike coming by the fourth quarter of 2022, including two who expected it to come as early as the next trimester.

In the April poll, only two economists expected a quarter-point rise in 2022.

“We think the BOT will become less and less dovish given rising domestic inflation and an accelerating global trend towards higher rates,” noted Krystal Tan, an economist at ANZ.

“A sustained recovery would give the BOT room to start focusing on anchoring domestic inflation expectations in the months ahead and phasing out pandemic-era stimulus.”

Although forecast medians showed interest rates reaching their pre-pandemic levels of 0.75% in the first quarter of 2023, forecasts ranged from 0.50% to 1.50%, suggesting uncertainty about political direction.

While six out of 17 saw rates at 0.75% at the end of March, four indicated 1.00% or more. The remaining seven rates plan to remain at 0.50%.

Expectations of a further 25 basis point rate hike have been postponed to Q2 2023 from Q3 2023 in the last survey, bringing the rate to 1.00%, where it is expected to remain until the end of the month. ‘next year.

(Reporting by Devayani Sathyan and Anant Chandak; Polling and analysis by Arsh Mogre and Md. Manzer Hussain; Editing by David Holmes)

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