Key View
- We at Fitch Solutions maintain our view that the Bank of Thailand (BoT) will keep its policy rate on hold at 0.50% through 2022, despite inflation rising and external monetary tightening.
- The threat to Thailand’s economic recovery posed by omicron, the BoT’s willingness to allow for a weaker Thai baht and subdued core inflationary pressures will all contribute to the accommodative policy stance.
- However, rising household indebtedness, higher global inflationary pressures and FX volatility could force the BoT into a more hawkish stance.
We at Fitch Solutions maintain our view that the Bank of the Thailand (BoT) will keep its policy rate on hold at 0.50% through 2022. At its final meeting of 2021, the BoT’s Monetary Policy Committee voted unanimously to keep its policy rate at 0.50%, marking the thirteenth policy meeting in which the Committee has opted to keep its policy rate on hold. The BoT noted temporary inflationary pressures from rising energy prices and the likely disruptions from the omicron variant to the economic recovery and as such, felt monetary conditions should remain supportive. Thailand’s stunted economic recovery in 2021 has delayed the need for monetary tightening, given still weak domestic demand pressures and a subdued outlook for core inflation. With the outlook for 2022 somewhat dimmed by the emergence of the omicron variant and reimposed travel restrictions, it appears that Thailand’s economy will continue to face uncertainties that warrant accommodative policies. This will come despite tighter external financing conditions, resulting from monetary policy tightening elsewhere, most notably in the US.
