Bank of Thailand to hold rates this year, economists split on next cut – Reuters poll

By Veronica Dudei Maia Khongwir

BENGALURU (Reuters) – The Bank of Thailand (BOT) will keep its key interest rate unchanged on Wednesday after a surprise October trim, according to a Reuters poll of economists, though they were divided on whether the bank would hold or cut early next year.

Consumer inflation has remained below the central bank’s target for most of this year but rose to 0.95% in November, edging closer to its lower-end target range of 1-3%.

Southeast Asia’s second-largest economy grew 3.0% annually last quarter – its fastest pace in two years – after lagging regional peers as it struggled under high household debt.

Momentum is likely to pick up this quarter and next year as tourism and exports, key drivers of growth, are expected to continue supporting the economy along with government stimulus measures, which began in September.

Nearly all economists, 28 of 30, in the Dec. 9-13 poll forecast the central bank would keep its benchmark one-day repurchase rate at 2.25% on Dec. 18. Two predicted a 25 basis point cut.

“The Bank of Thailand will stay on hold. The BOT will decide the economy doesn’t need any more accommodative support because fiscal policy has started to do the heavy lifting,” said Lavanya Venkateswaran, senior ASEAN economist at OCBC Bank.

The government wants to see interest rates reduced further to support the economy while BOT Governor Sethaput Suthiwartnarueput said earlier this month a mix of policies was needed to manage the economy as interest rates alone cannot address everything.

Among those who had a long-term view, just over half, or 14 of 27 said interest rates will remain on hold next quarter. The rest expected a decrease of 25 basis points.

This lack of consensus stems from concerns around the uncertainty of U.S. President-elect Donald Trump’s proposed policies on trade tariffs and their effect on the export-driven economy.

The U.S. Federal Reserve is expected to reduce interest rates by 75 basis points before end-2025, down from 100 bps seen in September, putting additional downward pressure on the Thai baht, which has risen around 1% against the dollar this year.

“We don’t see much room for the BOT to ease further. The Thai baht’s value is still very much a concern and the central bank will still want to keep the baht at a reasonable level,” said Erica Tay, director of macro research at Maybank.

A slim majority in the poll said a February rate cut was unlikely.

Median forecasts suggested a 25 basis point cut in Q2, bringing rates to 2.00%, a change from an October snap poll where the next reduction was predicted to come next quarter. Rates were expected to remain there for the rest of the year.

(Other stories from the Reuters global economic poll)