Thailand Set to Halt Tightening Cycle as Inflation Loses Steam

(Bloomberg) -- Thailand is poised to leave its benchmark interest rate unchanged after eight successive quarter-point increases since last year that pushed inflation below central bank’s target even as economic growth remained dismal.

The Bank of Thailand will keep the one-day repurchase rate unchanged at 2.5% on Wednesday, all 22 economists surveyed by Bloomberg predict as the first hold decision in 17 months. The BOT will probably leave borrowing costs at a decade-high through the coming year, a separate Bloomberg poll showed.

The key rate has reached the neutral level and it’s time to hit the pause button on tightening, Governor Sethaput Suthiwartnarueput said days after the September rate hike that took the BOT’s cumulative tightening to 200 basis points. At that time, he expected the rate to stay at the current level “for a while” though economists are recently seeing rising odds of a rate cut next year.

“The BOT is likely to make its decision with a forward-looking lens,” said Erica Tay, an economist at Maybank Investment Banking Group. “Policymakers will appreciate the room to be able to cut next year should GDP growth disappoint due to unforeseen shocks.”