One side forecasts that the MPC will cut the policy rate to boost domestic demand amid a decline in inflationary pressure. The cut would also help retard appreciation of the baht.

But the other side anticipates that the committee will keep the key rate unchanged amid mild inflationary pressure and an unclear economic outlook.

They believe the committee wants a smooth change of the interest-rate benchmark.

In today's meeting, the MPC is to change the interest-rate benchmark from the 14-day repurchase interest rate to one-day rate in order to allow the transformation of the policy rate to the market rate to perform more efficiently.

The rate-change group forecasts that the one-day rate will be fixed at 4.75 per cent, lower than the current rate of 4.96875 per cent a year. The other side believes that the committee is likely to set the one-day key rate at 5 per cent, being equal to the current 14-day policy rate and close to the current overnight rate.

Supavud Saicheua, managing director of Phatra Securities, said there was more than a 50-per-cent chance that the committee would slash the rate to 4.75 per cent as oil prices will not shoot up any more.

"Inflation already reached its peak last July. The central bank could have actually cut the rate last October but it did not," he said.

Tak Bunnag, executive vice president of Bank of Ayudhya, forecast that the MPC would cut its repurchase rate by 25 basis points in today's meeting. He said the pressure of the country's inflation rate had been reduced after global oil prices turned stable. Moreover, the US policy rate is also in a downward trend because the country will maintain a low interest rate to support its economic growth.

Bunluasak Pussarungsri, vice president in the macroeconomic analysis centre of Bangkok Bank, also expected the MPC to decrease the repurchase rate by 25 to 50 basis points. This is factored by a reduction in the country's inflation rate. The policy rate cut would also reduce pressure for a stronger baht.

Chukiat Titihirunjaroen, chief investment officer of SCB Asset Management's investment group, expects the central bank to reduce the policy rate.

"It will depend on the implications that the central bank would signal. If the Bank of Thailand signals that the interest rate will be continuously decreased, it would boost sentiment in the stock market," Chukiat said.

However, Usara Wilaipich, a senior economist at Standard Chartered Bank (Thai), believes the committee will not change the policy interest rate at this meeting in order to prevent market confusion from the benchmark transformation. Usara expects the central bank to slash the rate in the second quarter of the year.

Sukit Udomsirikul, a strategist at Siam City Securities, said the MPC was likely to keep the policy rate intact at 5 per cent because an economic slowdown was still not certain. Consumer confidence has not worsened enough to be boosted.

"The economic outlook is still unclear. The MPC can wait because it is just the first month of the year," he said.

DBS Bank said in its recent report that the MPC was expected to keep the policy rate unchanged at 5 per cent, while it expects a cut of 25 basis points at the next MPC meeting on February 28 and another 25-point cut in the second quarter.

TMB Bank believes the MPC will keep the policy rate unchanged at 5 per cent today, saying the MPC would like to wait until the next meeting in February to evaluate the economic situation before making a decision.

Anoma Srisukkasem

The Nation