Research houses expect the Bank of Thailand to raise its policy rate one or two additional times this year because of an upside risk to inflation as the economy recovers.
SCB Economic Intelligence Center (EIC), a research unit of Siam Commercial Bank, predicts the central bank's Monetary Policy Committee (MPC) will raise its policy benchmark rate by a quarter percentage point in both August and September. Under the projection, the rate would increase to 2.5% from the current 2%.
Even though the inflation rate is within the central bank's target range of 1-3%, an upside risk to inflation remains, said SCB EIC.
Inflationary pressure from the demand side is expected to increase as the tourism sector recovers.
The research house expects business operators to pass on higher costs to consumers throughout this year.
Therefore the central bank's neutral policy rate should be 2.5%, in line with the potential growth rate of the Thai economy, with the inflation rate below the official target, SCB EIC said.
On the other hand, Krungthai Compass, a research house under Krungthai Bank, expects the MPC to maintain its policy rate unchanged at the next meeting in August, then hike it later in the year to 2.25% following the formation of a new government.
"If a new government can be formed smoothly, the central bank will increase its policy rate by 0.25 percentage points to curb the inflation rate," said Krungthai Compass.
If the new government implements economic stimulus measures, it would increase the upside risk to inflation even though the rate has been declining as most prices have stabilised or declined, said the research house.
The central bank forecasts headline inflation of 2.5% in 2023, dipping to 2.4% in 2024.
However, the Bank of Thailand expects the core inflation rate to be steady at 2% in both 2023 and 2024.
As a result, the central bank is expected to pay more attention to containing core inflation, which represents 67.1% of the inflation basket. In this scenario, the central bank's interest rate hikes would continue, said Krungthai Compass.
On Wednesday, the MPC decided to hike its policy rate by 0.25 percentage points to 2% with immediate effect.
Bangkok Bank, the country's largest lender by total assets, announced on Thursday it would increase its saving account interest rates by 0.05-0.25%, while lifting its loan interest rates by 0.2%.
The bank's minimum lending rate is currently 6.85% per year, the minimum overdraft rate is 7.3%, and the minimum retail rate is 7.05%.