Thailand's central bank is expected to yet again leave its key interest rate near record lows on Wednesday as it focuses on supporting growth as inflation remains benign, but analysts say policy tightening could be on the cards before year-end.
Twenty one of 24 economists surveyed by Reuters predicted the Bank of Thailand (BoT)'s monetary policy committee will keep its one-day repurchase rate at 1.50%, where it has been since April 2015, just above the all-time low of 1.25%.
The rest forecast a quarter-point increase to 1.75%, which would be the first hike since August 2011, as improving growth pushes up inflation closer to the mid-point of the BOT's 1-4% target.
Having spent over a year below that target, annual inflation is currently running at 1.62%, while the baht has been Asia's second-best performing currency this year, suggesting capital outflows have been relatively well contained.
A hefty current account surplus and low inflation mean that unlike Indonesia and India - which have deficits - Thailand is under no immediate pressure to follow rising US interest rates.
Last week, Finance Minister Apisak Tantivorawong said there was no need to tighten policy at the moment due to low inflation and risks from global trade tensions.
"We don't see a pressing need for a policy move just yet. Growth has started to moderate in Q2 and is likely to slow further in the second half of the year," said Prakash Sakpal, economist of ING.
Yet in the Reuters poll, 12 of the 18 analysts who gave a medium-term view predicted a 25 basis-point hike before year-end, while the rest saw no change.
Tim Leelahaphan, economist of Standard Chartered, sees two rate hikes in 2018, starting with one this week to build policy room in case of "an unforeseen economic shock in the future".
Growth in Southeast Asia's second-largest economy has picked up but remained heavily reliant on exports and tourism as domestic demand has lagged.
The BoT has previously signalled that monetary policy tightening is only a matter of time, though Governor Veerathai Santiprabhob said late last month that there was no immediate need to raise rates as Thailand had strong external buffers and a relatively solid currency.
Jitipol Puksamatanan, analyst of Krung Thai Bank, said the MPC should give a clearer signal of its monetary policy stance to avoid market confusion.
The central bank has forecast growth of 4.4% this year and 4.2% for 2019, but is expected to upgrade them on Wednesday. The economy grew 3.9% last year, the best in five years.