Thailand likely to hike rates in August after holding steady in June: Moody’s Analytics  

INTEREST rates in Thailand are expected to rise as early as August this year after its central bank “(resists) the urge to begin monetary normalisation imminently” in June, according to Moody’s Analytics, a subsidiary of American business and financial services company Moody’s Corporation.

In an analysis published on Tuesday (Jun 7), Moody’s Analytics associate economist Eric Chiang highlighted the country as one of the laggards in the Asia-Pacific region alongside Indonesia and Vietnam.

This comes even as most other central banks have already shifted towards a normalisation path to tackle rising domestic inflation, he added.

Describing Thailand’s higher-than-expected headline inflation and CPI (consumer price index) data in the year to May 2022 as “particularly eye-watering”, Chiang expects the rising cost of fertiliser and animal feed to exacerbate food inflation into the September quarter.

“The Thai baht is under pressure along with other emerging market currencies from the downward revisions to global growth, including in China, creating a more risk-off environment,” said the economist, noting that the baht was hovering around a 5-year low as at mid-May. 

“The Bank of Thailand’s resistance to joining the monetary policy normalisation party is another factor… In all, we expect the central bank to be pushed to normalise rates under pressure from rising inflation and the risk of further currency depreciation,” stated Chiang.

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Moody’s Analytics is maintaining its view that Thailand’s full-year GDP (gross domestic product) growth will hit 3.5 per cent in 2022.

Highlighting a recovery in service exports, the company noted goods exports have been under pressure from rising input costs including fuel, as well as ongoing supply disruptions.