Baht Holds Gains After BoT Delivers Expected Rate Hike, Raises 2023 Inflation Outlook

The Bank of Thailand raised its key policy rate by 25bp to 1.25% in a unanimous vote, in line with expectations (click here to see the full statement).

• The Committee tipped hat to the recovery in private consumption and tourism, which are seen as the key drivers of growth going forward. The outlook for GDP expansion is slightly flatter, with the 2022 forecast revised to +3.2% Y/Y (from +3.3%) and the 2023 projection revised to +3.7% Y/Y (from +3.8%).
• Inflation is expected to be higher than previously expected next year, due to elevated domestic energy prices. While headline inflation projection was confirmed at +6.3% Y/Y, Thailand's central bank now sees prices growing 3.0% Y/Y in 2023 (versus +2.6% projected in September).
• The Committee assessed that medium-term inflation expectations are anchored within the target range, but it "will continue to closely monitor risks to inflation, especially a potential increase in cost pass-through as well as domestic energy prices which remain uncertain."
• The Committee resolved to continue normalising monetary policy in a "gradual and measured manner," confirming the BoT's status as one of the chief laggards in the global wave of tightening. Policymakers noted that caution is consistent with ensuring sustainable long-term growth.
• Spot USD/THB has held losses after the announcement and last deals -0.113 at THB35.313, closing in on its 200-DMA, which has remained intact since early March. A break here would open key support from Aug 11 low of THB35.160.