Analysts are ruling out the possibility the Bank of Thailand will cut interest rates this year after the US Federal Reserve sent clear signals it would trim the US rate only once in 2024, followed by four more cuts next year.
Kuala Lumpur-based Maybank said even though the Thai GDP growth outlook has been progressively slashed since the start of the year, the Bank of Thailand has less wiggle room for easing, given that projections for Fed cuts have been pushed back.
The Fed kept its key interest rates unchanged at a 23-year high of 5.25-5.50% on Wednesday, with chairman Jerome Powell noting that US inflation was still too high, though it is falling.
The dot-plot predicts one rate cut this year and four rate cuts in 2025.
In an environment where Asian central banks are more inclined to keep their policy rates elevated to counter pressure on their currencies, the Bank of Thailand struck a measured rather than hawkish tone in its inflation and GDP growth outlook, Maybank said in a research note jointly prepared by director of macro research Erica Tay.
"Nonetheless, given external market developments, the Bank of Thailand is less likely to ease this year as this may trigger excessive baht volatility," said the bank.
Maybank dialled back its Thai rate cut forecast, expecting a reduction of only 25 basis points in 2025.
The banking group maintained its Thai GDP growth forecast of 2.4% this year and 2.8% next.
Pipat Luengnaruemitchai, emerging Asia economist at Bank of America (BofA), said the Monetary Policy Committee (MPC) has continued to express concerns about high household debt and stressed the importance of debt deleveraging to help mitigate vulnerabilities in the macro and financial system in the long term.
As the country's financial condition remains stable, the committee supported measures to restructure debt and improve credit access issues, as well as targeted initiatives such as credit guarantee schemes, particularly for small businesses.
The MPC reiterated its assessment of a continued economic recovery, forecasting growth of roughly 3% and 4% in the third and fourth quarters, respectively, with inflation returning to the target range during the final three months.
BofA is maintaining its forecast of zero Thai rate cuts this year, he said.