Market analysts anticipate that the Bank of Thailand may take action during its upcoming mid-October meeting due to the rapidly appreciating baht. This situation is fueled by significant inflows, which are continuing to bolster the currency’s strength.
According to the head of research at a leading securities firm, the baht has appreciated nearly 4% against the US dollar year-to-date, outpacing its regional counterparts. In addition, inflation rates have plummeted since the second quarter of 2023, with projections indicating an average of just 0.8% for the year, falling below the central bank’s target range of 1-3%.
As the baht experiences substantial growth since July, inflation has become a lesser priority for policymakers. Analysts suggest that this shift may provide the Bank of Thailand with the flexibility to lower interest rates, especially in light of a sluggish domestic economy.
Current trading figures indicate the baht at 32.97-99 to the dollar, up slightly from the previous day, partly benefiting from record high global gold prices. Analysts forecast that the currency will fluctuate between 33.00 and 33.50 throughout the week.
With the US Federal Reserve recently cutting its policy rate, experts expect further reductions in the coming months, potentially leading to increased fund flows into Thailand. This could spur additional appreciation of the baht.
Market predictions suggest a potential 25 basis point cut in the Bank of Thailand’s policy rate to 2.25% at their next meeting on October 16. Despite this move, analysts believe the Thai rate will likely decrease more slowly compared to its regional peers, potentially affecting the country’s export sector.
Further down the line, analysts anticipate an overall reduction of 50 basis points next year, bringing the rate to 1.75% by the end of 2025, aligning with pre-pandemic levels.
Leading brokerage firms are urging swift action from the Monetary Policy Committee to stabilize the baht, which has gained 10.3% this quarter, marking the largest increase among Asian currencies and reaching its strongest position in 25 years. A rate cut of 25 basis points is expected during one of the two remaining MPC meetings on October 16 or December 18.
