Local economists are predicting the Bank of Thailand will increase its policy rate to a terminal level of 2% this month after estimating the Fed's funds rate has already peaked.
According to ttb analytics, the research centre of TMBThanachart Bank (ttb), the central bank's Monetary Policy Committee (MPC) is expected to increase the policy benchmark rate by 0.25 percentage points at its upcoming meeting on May 31 from the current rate of 1.75%.
Following the rate hike, the central bank is expected to maintain the rate unchanged for the remainder of this year, prioritising financial stability amid global uncertainties and a high rate of inflation, said ttb analytics.
Although the country's inflation rate has been steady, it remains at a high level and may increase slightly in the second half of the year as the tourism sector recovers.
The research house forecasts core inflation at 1.5% this year, with headline inflation at 2.3%.
On Thursday, the US Federal Reserve hiked its policy rate by another quarter-point, taking a heavy toll on capital and money markets worldwide.
The policy rate hike is also expected to impact baht movement versus the greenback.
The research centre predicts the baht will appreciate to 33.50 to the US dollar by the middle of this year.
Kasikorn Research Center (K-Research) also forecasts a 0.25 percentage point uptick in Thailand's benchmark rate this month, after which the central bank will monitor the global economy and higher risks in the US financial industry before making a decision on further policy rate movement.
K-Research reported the Fed rate hike by 0.25 percentage points came as no surprise.
The research house expects the Fed's increase to 5-5.25% will be its terminal rate for this cycle, in line with the Fed's dot plot chart.
The dot plot chart summarises the Federal Open Market Committee's outlook for the Fed's funds rate.
The chart is published quarterly and watched closely by investors and economists for indications of the future trajectory of the Fed's funds rate.
K-Research predicts the MPC will increase its policy benchmark rate by 0.25 percentage points this month.
After the hike, the central bank is expected to monitor the global economy amid several uncertainties and higher risks for the US financial industry before making a decision on further policy rate movement, said Nattaporn Triratanasirikul, deputy managing director at K-Research.
Standard Chartered Bank also projects a 0.25 percentage point uptick, which it views as terminal for this interest rate cycle.
Despite global uncertainties, Thailand's robust economic indicators and the Bank of Thailand's positive outlook for the economy are expected to continue to support policy rate normalisation in an effort to build policy space, said Standard Chartered.