KResearch: MPC to raise policy interest rate by 0.25%

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BANGKOK, 11 July 2011  – Kasikorn Research Centre (KResearch) has expected that the Monetary Policy Committee (MPC) will increase the policy interest rate by 0.25%, from 3.00% currently to 3.25% in the MPC meeting on Wednesday. 

KResearch believed that the policy interest rate hike would be made in the fifth meeting of the MPC this year scheduled for 13 July, in order to maintain economic stability amid the risks of rising product prices and the skyrocketing inflation rate.

KResearch expected that the Thai economy would continue to expand due to several driving forces such as the revived production capacity in the latter half of this year, especially, in industries related with supply chain in Japan, and the rising consumption rate.

KResearch believed that the Thai economy would remain strong amid the rising consumption if the national politics was also stable, leaving opportunities for the MPC to gradually adjust the policy interest rate back to the normal level.

An interesting domestic factor to be monitored is the policy of the Pheu Thai-led government, which is expected to focus on economic expansion, product prices and inflation rate, all of which might contribute to rising inflation in the medium term.

An external factor that must be assessed is the global economic slowdown, led by the US and China, which might ease the inflationary pressure if food and energy prices remain stable. KResearch concluded that those domestic and external factors definitely provide a challenge for the MPC to come up with more tactics to counter the situation in its next meeting on 24 August.