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Despite the calls for a reduction of the interest rates, the likelihood of the Monetary Policy Committee (MPC) cutting rates during its meeting on October 16 looks unlikely.
Thailand’s policy rate has remained at the current levels of 2.5% since its MPC meeting on September 27, 2023 and at that time the Bank of Thailand (BoT) had said that it needed to raise the rates to offset the nearly 600 billion Baht that was supposed to have been injected into the system under the original plans of the disbursement of the 10,000 Baht/citizen to all Thai nationals who were above the age of 16 years.

The 10,000 Baht/person disbursement plans were changed to have certain conditions and as of now about 35 million people are likely to be eligible to receive the 10,000 Baht each but only 14.5 million people have seen the funds flow into their accounts.
With just 145 billion Baht being injected into the system, the liquidity in the system is far below anticipated that could have happened, had the 10,000 Baht/person being implemented for every citizen as was initially planned.
The slower and lower amount of funds circulating in the system has helped keep inflation in check and this was evident from the not so high inflation numbers seen in September 2024.
The headline consumer price index (CPI) number for September was just 0.61% year-on-year (YoY), below the Bloomberg consensus estimate of 0.75% YoY. Core CPI for the month was 0.77% YoY.

Economists now forecast 2024 headline inflation of only 0.5% YoY, below the BoT’s target range of 1-3%.
“We maintain our average inflation projection of 0.6% in 2024 in light of sluggish domestic demand but to average higher at 1.5% in 2025 as demand improves as we expect services exports to remain strong,” Enrico Tanuwidjaja, ASEAN Economist, Global Economics & Market Research of UOB Group, said in a note.
He added that the impact of the 10,000 Baht cash handout scheme on domestic prices remained muted. Based on the preliminary results of the Ministry of Commerce’s survey, retail prices of goods and services were kept unchanged, particularly prices of raw food items.
The pressure on the BoT continues to mount, for the central bank to cut the policy rate by 25 basis points (0.25%) if not 50 basis points. Politicians have taken the lead to ask the central bank to cut the rates while businesses have been asking for such cuts for months.

A recent survey by UOB indicated that as much as 47% of those surveyed wanted to see the interest rates lowered, while about 34% of the people surveyed that they wanted a waiver or lowering of transaction fees.
The survey was undertaken with more than 600 companies from small and medium-sized enterprises and larger companies.
“Despite our expectation of inflation to average higher next year, we continue to expect the BoT to keep the policy rate unchanged at 2.50% throughout 2024 and 2025. Since the last meeting in June, according to the BoT, its macroeconomic projections have not changed significantly. The central bank is expected to update its economic outlook at the upcoming MPC meeting scheduled for October 16,” Enrico said.
