Bangkok, Aug. 3- SCB EIC expects the MPC to raise the policy rate one more time at the September meeting to the terminal rate of 2.5% and keep it at this rate.
After the MPC unanimously resolved to raise the policy rate by 0.25% per year from 2% to 2.25% per year, SCB EIC expects that the MPC will continue to adjust Thai monetary policy to normal levels. It is appropriate for the long-term growth of the Thai economy. It is estimated that Thailand’s neutral interest rate is likely to be at 2.5%, which is the interest rate at which Thai economic growth is at the potential level and the inflation rate is within the target range 1. -3% of the Bank of Thailand (BOT) ) on a sustainable basis. In addition, a normalization of monetary policy will result in Thailand’s real interest rate returning to positive as it was before COVID-19 after continuing to be negative in the post-COVID-19 period. This will enhance long-term economic and financial stability by preventing the accumulation of monetary imbalances caused by prolonged low interest rates. It will also help maintain the capacity of monetary policy. To support the uncertainty in the future at a high level.
Recent policy interest rate hikes have resulted in higher funding costs in the Thai credit market. according to the direction of the policy interest rate Meanwhile, corporate funding costs in the bond market increased in line with the policy interest rate direction. Thai government bond yields across all maturities rose from the period before the MPC began raising the policy rate in the third quarter of 2022.
However, in the next phase Corporate fundraising through the bond market tends to slow down. This is because many businesses have accelerated the issuance of debentures in the past to lock in the cost of interest rates. While investors have been more cautious in investing in the bond market as credit risks of some fundraisers have increased. in the first half of the year The bond market is at increased risk of default. Including the number of firms whose credit rating and outlook have been downgraded more, which is considered a factor to put pressure on investment in the bond market and poses a risk of roll-over of high-yield bonds that are due to maturity. business sector. In addition, rising interest rates may affect funding and debt serviceability of vulnerable households and SMEs, affecting credit quality. While fundraising in the bond market has continued to increase in the past. but is expected to start to slow down in the next phase
Source: Thai News Agency