Has the Bank of Thailand completed its cycle of interest rate increases?

On September 27, the Bank of Thailand (BoT) raised its benchmark policy rates by 25 basis points (bps) to 2.50%, pushing borrowing costs to their highest since 2013.

Key View

• The Bank of Thailand (BoT) raised its policy rate by 25 bps to 2.50% in September 2023, the highest since 2013, as a pre-emptive measure against inflationary pressures from government spending.
• The BoT is expected to keep the rate unchanged at 2.50% for the rest of 2023 and most of 2024, as inflation remains subdued and growth is lacklustre.
• The BoT may start cutting rates in H2 2024, following the US Federal Reserve, but the risks are skewed towards a longer hold if there are supply shocks that push up inflation.

The hike came as a surprise to many analysts, including us, particularly because inflation in Thailand is currently very low. We believe the primary motivation seems to be a pre-emptive measure against the…