By Pranoy Krishna
Are you curious about what the Bank of Thailand (BOT) has in store for interest rates? A recent Multibagger poll reveals that the BOT plans to maintain its current interest rates unchanged on Wednesday and throughout the first quarter of 2025. This decision aims to strike a balance between fostering economic growth and controlling inflation, all while keeping a close eye on the effects of political instability on the economy.
Despite calls from the government to lower interest rates, Governor Sethaput Suthiwartnarueput believes that the current rate is appropriate. With inflation hovering at 0.83% in July, below the BOT's target range of 1%-3%, there is no immediate need for a rate cut.
The recent dismissal of Thai Prime Minister Srettha Thavisin and the appointment of Paetongtarn Shinawatra as the youngest prime minister have added to the political uncertainty in Thailand. The BOT, previously at odds with Srettha's government over cash handouts to address high household debt, will adopt a cautious approach to assess the impact of these changes on the economy.
While most economists expect the BOT to maintain its benchmark one-day repurchase rate at 2.50% on August 21, a few predict a 25 basis point cut. The prevailing weak Thai baht, down approximately 2% against the U.S. dollar this year, suggests that any action taken before the expected policy easing by the U.S. Federal Reserve in September could lead to inflationary pressures.
Looking ahead, median forecasts indicate that interest rates will remain steady at 2.50% until the first quarter of 2025, followed by a 25 basis-point reduction in the second quarter. However, some economists foresee a steeper rate cut to 2.00% by the end of 2025, contingent upon the evolving political landscape.
Despite the prevailing uncertainties, some experts believe that the BOT is likely to maintain its policy stance, with no changes expected until the end of 2025. However, the ongoing political turmoil could prompt policy adjustments sooner than anticipated.
In conclusion, while the BOT's decision to keep interest rates unchanged may seem stable, the underlying political dynamics could introduce unexpected shifts in the financial landscape. It is crucial for investors and individuals to stay informed about these developments and their potential impact on their finances.