SCB EIC anticipates that the MPC still has room to lower the policy rate again next year.
SCB EIC expects the MPC to deliver another rate cut within Q1 2025 to further ease financial conditions as economic and credit slowdowns persist.
The MPC maintained the policy rate at 2.25%.
The MPC voted unanimously to maintain the policy rate at 2.25%, aligning with SCB EIC's projections. The committee deems the current policy interest rate to be consistent with economic trajectory near its potential and inflation returning to lower bound of the target range. Maintaining the current policy rate supports long-term macro-financial stability while preserving policy space for heightened future uncertainties, especially due to major economies' policies.
Economic and Inflation Outlook
The MPC maintains its Thai GDP growth projections at 2.7% in 2024 and 2.9% in 2025. However, challenges facing the Thai economy are expected to increase, influenced by intensified global competition and policy uncertainties from major economies. Inflation is projected to return to the target range, with the projections revised slightly downward to 0.4% in 2024 and 1.1% in 2025, compared to the October's projections of 0.5% and 1.2%.
SCB EIC observes that the latest communication by the MPC reflects a notably more hawkish stance compared to the previous meeting. The MPC did not express significant concerns regarding the overall economic outlook and assessed that the current challenges facing the Thai economy stem primarily from structural factors rather than cyclical ones. These structural issues particularly affect specific sectors such as SMEs and certain industries, including the automotive sector, which is facing intensified competition.
Furthermore, the MPC showed somewhat limited concern over the recent slowdown in credit growth, attributing the deceleration to two main factors: (1) loan repayments by well-performing businesses, such as those in the tourism, service, and trade sectors (particularly large enterprises), and (2) subdued credit demand from businesses with slower or incomplete recoveries, including SMEs in the trade, real estate, construction, and automotive sectors. Furthermore, the MPC expected the continued expansion of the overall economy despite slowdowns in business credits.
SCB EIC also notes that the MPC did not place significant emphasis on household sector vulnerabilities or
the process of debt deleveraging during this meeting. This could be partly attributed to prior communication by the Bank of Thailand (BOT) regarding household debt resolution strategies, as highlighted during
the announcement of the "You Fight, We Help" initiative.
