The Global Markets team at Krungsri Bank (Ayudhya Bank Public Company Limited) commented on the outcome of the Monetary Policy Committee (MPC) meeting, stating that the MPC decided to keep the policy interest rate at 1.50%. This marks the 27th consecutive hold on interest rates following a split vote of 5 to 2, with two members voting for an increase. As a result, the baht strengthened, reaching its highest level in three months at 32.47 per dollar. Since the beginning of the year, the baht has appreciated by 0.2% against the dollar, performing better than most emerging market currencies, despite increasing risks related to international trade wars.

           The MPC believes that the Thai economy continues to show signs of growth driven by both domestic and international demand. While exports may slow down due to the impact of trade restrictions between the U.S. and China, the relocation of some industries to Thailand may mitigate some of the effects. Regarding price pressures, the MPC noted that core inflation may rise more slowly than previously estimated, but it still forecasts economic growth for 2018 at 4.4% and expects export growth and inflation rates at 9.0% and 1.1%, respectively. Additionally, the MPC emphasized the need to monitor the movement of the baht, as the market views it as a safe currency, alongside the recent rise in government bond yields. However, the MPC remains cautious about underestimating risks, which may arise from prolonged accommodative monetary policy.

           The MPC is scheduled to meet again on November 14, 2018. The Global Markets team at Krungsri views today’s vote as paving the way for a gradual interest rate hike cycle and notes that this is the first time the MPC has clearly stated in its announcement that the current level of accommodative monetary policy will gradually reduce the necessity for such measures. The Global Markets team anticipates that the first interest rate hike will occur in November, driven by improved economic conditions, the ability to implement future monetary policies, and the trend of monetary policy adjustments globally, while still keeping an eye on various risk factors, particularly the uncertainties surrounding U.S. economic policies.