The MPC voted 6-1 to maintain the policy rate at 2.50%. They projected slow domestic demand and tighter financial conditions. SCB EIC anticipates rate cuts to 2.25% in late 2024, and 2% in early 2025.
The Monetary Policy Committee (MPC) has decided to keep the policy rate at 2.50%, with a 6 to 1 vote supporting this choice. One member advocated for a 0.25 percentage point cut. While the Thai economy is growing as projected, recent data shows a slight dip in headline inflation primarily driven by supply-side factors. The MPC expressed concerns about domestic demand’s potential slowdown and uneven recovery among sectors, particularly in manufacturing, which may affect future credit quality and lending standards.
Looking ahead, SCB EIC anticipates two rate cuts, with the policy rate falling to 2.25% in late 2024 and 2% in early 2025. These adjustments aim to ease tightening financial conditions, especially for households and businesses, which could further hinder domestic demand. Uncertainties in 2024 may necessitate more active monetary policies to sustain economic momentum.
Recent economic indicators reflect this cautious sentiment, with signs of weakening domestic demand emerging in GDP growth figures. Headline inflation remains below target, and core inflation shows persistent weakness. With households facing stricter lending standards, borrowing capacity is diminishing. Given these dynamics, SCB EIC predicts that the MPC will likely cut rates by year-end to support the economy amidst growing external challenges and uncertainties in domestic policies.
