The Bank of Thailand's Monetary Policy Committee (MPC) is likely to keep the policy interest rate unchanged at 2.5% at its meeting on Wednesday as May inflation rose sharply, coupled with the expectation of a similar move by the US Federal Reserve this week.
The Bank of Thailand is also concerned about the baht's volatility.
Headline inflation rose to 1.54% in May, the second consecutive month in positive territory following a 0.19% rise in April, surpassing the market consensus of 1.2% because of a low base effect from last year's electricity tariff and surging food prices.
"This was the first time since April 2023 that inflation came within the Bank of Thailand's target range of 1-3%. However, underlying price pressures in the economy remained muted," Maybank said in a report jointly prepared by director of macro research Erica Tay.
The Kuala Lumpur-based banking group anticipates Thailand's consumer price index to average 0.9% growth this year and 1.8% in 2025.
"With inflation returning to the target range earlier than expected, instead of at the end of 2024, and supply side disruptions keeping energy costs elevated, there are less compelling reasons for a rate cut at the next policy meeting on June 12," said Maybank.
The central bank is likely to be "vigilant on inflation for the rest of the year", even as the gross domestic product (GDP) growth outlook remains uncertain, said the banking group.
While a surge in postponed public works will boost GDP growth to 3.3% in the second half, other growth drivers including exports have turned less buoyant. Maybank projects Thai GDP will expand by only 2.4% this year, downgraded from 3.2% at the start of the year.
Lalita Thienprasiddhi, head of researchers at Kasikorn Research Center, said the MPC is projected to maintain the rate at the decade-high level of 2.5% on Wednesday.
"The committee signalled at its last meeting the interest rate is at an appropriate level for maintaining the stability of the economy and financial system. The rate is suitable to maintain the central bank's policy space in coping with future uncertainties," she said.
The think tank anticipates the Fed will keep the US rate untouched at its meeting on June 11-12, sending a clear signal it will trim the rate less than three times this year, as investors perceived from its policy statement at its March gathering.
"The Bank of Thailand is likely to focus on baht stability as the Fed is projected to keep the US rates elevated for longer," said Ms Lalita.