Abstract
The MPC in Thailand voted to maintain the policy rate at 2.50%, with one member voting to cut the rate. The economy is expanding as expected, but there are concerns about slowing domestic demand and tightening financial conditions. SCB EIC predicts two rate cuts to 2.25% and 2% by early 2025 to support economic momentum. Signs of weakening domestic demand are becoming apparent, and inflation remains below target levels. Financial conditions are tight, especially for households. A rate cut is expected to be implemented at the end of this year.
Summary
The MPC Decision
The Monetary Policy Committee (MPC) voted 6 to 1 to maintain the policy rate at 2.50%. While the Thai economy is expanding as projected, a slight decrease in headline inflation was observed due to supply-side factors. The MPC’s communication in this meeting was more dovish, citing increased downside risks in domestic demand and emphasis on uneven sector recovery.
Rate Cut Anticipation
SCB EIC anticipates two rate cuts by the MPC, lowering the rate to 2.25% in late 2024 and 2% in early 2025. These cuts aim to ease domestic financial conditions amidst tightening and fragilities in the business and household sectors. The slower pace of economic growth and weak domestic demand signals support the need for monetary policy intervention.
Economic Outlook and Financial Conditions
With signs of weakening domestic demand and tight financial conditions, SCB EIC expects a suitable timing for rate cuts towards the year-end. Household financial tightening and global uncertainties suggest a cut to 2.25% at the end of 2024 and 2% in Q1 2025. The forthcoming economic environment necessitates proactive monetary policy measures to support Thailand’s economic momentum in the face of evolving challenges.
