Economists believe the time is right for an accommodative monetary policy to ease financial tightening and improve economic activity.
According to Somprawin Manprasert, chief economist at SCB EIC, a research centre under Siam Commercial Bank, the central bank is expected to begin easing monetary policy soon.
The centre believes the Bank of Thailand's Monetary Policy Committee (MPC) will start cutting the policy rate by 0.25 percentage points in December this year. Another reduction by the same amount is anticipated for next year, bringing the central bank's policy rate to 2% for a prolonged period in 2025.
According to this assessment, the rate cuts would likely lead to lower interest rates in the banking industry, alleviating tight financial conditions, bolstering purchasing power and improving debt repayment capabilities, particularly among lower-income groups, said the think tank.
"Given the weak economic recovery, lower-income earners are significantly affected by the sluggish economy and tight liquidity. Easing monetary policy would benefit this vulnerable segment," said Mr Somprawin.
However, he said monetary policy easing is not limited to rate cuts. Policymakers can use other instruments to address financial tightening, such as implementing additional measures to inject liquidity into the market or relaxing certain regulations, said Mr Somprawin.
Phacharaphot Nuntramas, chief economist at Krungthai Compass, shared a similar view, predicting a policy rate cut of 0.25 percentage points in December and a similar reduction early next year.
"We believe it's time for monetary policy easing. Consecutive rate cuts will help ease the tight financial conditions and support economic growth," he said.
Amonthep Chawla, chief economist at CIMB Thai Bank, said an accommodative monetary policy would primarily support liquidity among lower-income segments, making regular purchases more affordable.
Despite a slight decline in the country's household debt-to-GDP ratio attributed to improved GDP growth and a steady policy rate, loan rejection rates have risen, preventing many borrowers from accessing bank loans.
Credit conditions in the banking sector have tightened, Mr Amonthep said.
According to the edited minutes of the MPC meeting published on Wednesday last week, financial conditions have somewhat tightened.
Financial conditions for small and medium-sized enterprises and certain households have tightened, as evidenced by slowing credit growth and a decline in credit quality, particularly for household loans, noted the minutes. This is partly because of weakened debt repayment ability for vulnerable households, stemming from a slow income recovery.