By Md Manzer Hussain

BENGALURU – Thailand’s central bank won’t raise interest rates more than a single year from a record low in order to help an economy struggling to recover after the pandemic, despite an increase in inflation. A Reuters poll confirmed this.

Although inflation in the tourism-dependent industry hit a 13-year-high in February due largely to rising energy prices, policymakers anticipate that these price pressures will only be temporary.

Russia’s invasion of Ukraine has caused an increase in energy and food prices around the world that could make it difficult for Bank of Thailand (BOT), to manage inflation. It was also found out by central banks, who previously said high inflation is temporary.

The BOT is expected to maintain its policy of accommodative growth, which was not possible due to subdued tourism recovery or tighter mobility restrictions.

A March 16-25 Reuters poll showed that 22 economists believed the BOT will leave its record-setting 0.50% one-day repurchase interest at its March 30-meeting. According to media forecasts, rates would not change until the end of the second quarter in 2023.

Chua Han Teng (economist at DBS) stated that “Under the cover of an unchanged rate, the MPC will likely deliberate on rising inflationary pressures amid high commodity prices and supply shocks against a background of a fragile economic that is facing high uncertainty and downside risks from geopolitics, and the pandemic.”

It was expected that the BOT would raise rates by 0.75% to the second quarter of next fiscal year. That makes the bank the last Southeast Asian central banking institution to do so.

There was an apparent split in economists’ expectations, with six expecting no change in rates for the second quarter. This suggests that there is still little confidence about the central banks’ policy direction.

Fourteen of the seven remaining voices were consistent with the median view. Two expected rates to rise to 1.00%, while a single voice predicted 1.25%.

Somprawin Menprasert (chief economist, Bank of Ayudhya) stated that “the current situation makes it more difficult for policymakers” to find a balance between price stability and managing economic growth risks.