The Bank of Thailand's Monetary Policy Committee (MPC) is expected to keep its policy rate at the historically low level of 0.5% throughout this year to maintain economic momentum, according to economists.
The US Federal Reserve is projected to raise its policy rate multiple times throughout this year.
Last week the Fed hiked its benchmark rate by 25 basis points to counter economic risks posed by excessive inflation and the war in Ukraine.
Wachirawat Banchuen, senior economist at SCB EIC, a research unit of Siam Commercial Bank, said the research house predicts the Fed will raise the policy rate seven times in a row this year by 25 basis points each meeting to control inflation.
However, the US economic environment, including Fed policy rate hikes, would not pressure the MPC's policy rate movement, he said.
Mr Wachirawat said when making a decision on the policy rate, the MPC would pay attention to internal factors, particularly economic fundamentals, internal stability and foreign capital flow.
He said the MPC would not be pressured by the US policy rate hike amid a fragile and uneven recovery of the Thai economy and the impact of the Russia-Ukraine war. The MPC this year is expected to keep the policy rate unchanged.
SCB EIC predicts foreign capital outflow, especially from the Thai bond market, after the Fed rate hike as not a great concern.
After offshore investors underweighted local bond investment during the pandemic the past two years, foreigners held only 9.7% of the total Thai bond market last year, a decline.
However, Mr Wachirawat said the Fed rate hike could impact the baht's depreciation against the greenback.
Given a stronger dollar in line with the US economic recovery, the baht has been declining against the greenback. The Russia-Ukraine war has continued the baht's slide against the dollar, he said.
Somprawin Manprasert, chief economist at Bank of Ayudhya (Krungsri), said the war caused greater global economic uncertainty, making the Fed likely to raise the policy rate five times this year.
The Ukraine crisis also dimmed hopes of a strong Thai economic recovery, he said.
Krungsri downgraded its GDP growth outlook this year. For the base case, it slashed the GDP growth forecast to 2.8% from 3.7% previously, assuming the Russia-Ukraine war continues into the second quarter, with stricter sanctions imposed on Russia.
Krungsri lowered GDP growth to 3.3% if the war ends in March and sanctions continue until the end of this year.
The Thai economy would grow by only 1.3% this year if the war continues into mid-2022 and Russia retaliates by cutting off its energy exports to Europe, said Krungsri.
The MPC is likely to prioritise supporting the fragile Thai economic recovery, which means it would keep the policy rate at 0.5% all year, Mr Somprawin said.
Kasikorn Research Center forecasts the Fed will raise its policy rate consecutively 5-7 times this year. The rate hikes are expected to be 25 basis points per meeting, making the Fed's policy rate 1.75-2% by year-end.
However, the Fed's policy rate movement also depends on the war, said the centre. If the war is prolonged and its impact greater than currently assessed, the Fed may slow rate hikes this year.