The Global Markets Division of Krungsri Bank Public Company Limited has announced the outcome of the Monetary Policy Committee (MPC) meeting held this afternoon. The Bank of Thailand (BOT) has decided to raise the policy interest rate to 0.75%, marking the first interest rate hike since December 2018, in line with market expectations. Six committee members voted in favor of a 0.25% increase, while one member supported a 0.50% hike.

The Monetary Policy Committee (MPC) assessed that the Thai economy is likely to return to pre-COVID-19 levels by the end of this year. The exceptionally accommodative monetary policy implemented to address the COVID-19 crisis is therefore becoming less necessary. The Thai economy shows signs of continuous recovery, with clear momentum from the increasing number of foreign tourists, improved private consumption, labor market conditions, and household incomes. However, risks to economic growth remain due to rising living costs. Future inflation is at risk of being higher due to the potential for cost-push inflation to occur more quickly and significantly than expected, with the MPC anticipating that inflation will peak in this quarter.

The Thai baht weakened to 35.53 baht per dollar following the MPC announcement. The baht has been highly volatile recently, depreciating over 6.6% this year amid soaring oil prices and the Federal Reserve's aggressive policy tightening. The MPC noted that the baht's movements are in line with the strengthening of the dollar, driven by concerns over a global economic slowdown and the Fed's policies. The MPC emphasized that it will continue to closely monitor developments and fluctuations in the financial markets and exchange rates.

The MPC is scheduled to meet again on September 28, 2022. This statement from the MPC indicates a gradual approach to interest rate hikes. One committee member voted for a 0.50% increase in the policy rate to mitigate the risk of needing a more drastic adjustment in the future. We believe that the MPC's statement aligns with the recent communications from the BOT. Krungsri anticipates that in next month's meeting, there will be another 0.25% increase in the policy rate, and does not rule out the possibility of further adjustments in the November meeting.