However, financial experts say an even bigger cut of 50 basis points is possible.

The Kasikorn Research Centre predicts the MPC will cut the policy rate at least 25 basis points. Whether it makes a bigger cut depends on how the committee views the economic environment.

TMB Bank believes the policy rate will fall another 25 basis points to 4.5 per cent, because of decreasing pressure from inflation. Headline inflation last month was only 3 per cent, compared with 3.5 per cent the previous month.

As well, risks to economic growth have increased because of an apparent slow-down in manufacturing and private investment last December.

The bank expects commercial banks to cut their rates further, by 25 or 50 basis points, following their earlier cuts.

If the MPC makes another cut in the policy rate tomorrow, it will move even farther away from the US Fed Funds rate of 5.25 per cent, which the Thai policy rate has tracked closely since January 2002.

The next meeting of the US Federal Open Markets Committee - which sets the Fed Funds rate - is three weeks away.

Last month, the MPC slashed its rate 25 basis points, bringing the Kingdom's one-day repurchase rate down to its present level of 4.75 per cent.

Standard Chartered Bank (Thai) economist Usara Wilaipich predicted the BOT would cut its policy rate 25 basis points but added that she would not be surprised if the committee opted for a cut of 50 basis points.

UBS subsidiary group UBS Investment Bank also predicted the possibility of a 50-basis-point cut.

USB Investment Research managing director for global economics Paul Donovan predicted the Thai one-day repurchase rate would fall to 3.75 per cent by year's end.

The Swiss research house also said it expected the US Federal Reserve to lower its policy rate to 4.5 per cent by year's end, from its current level of 5.25 per cent.

Donovan said the MPC's rate cut would help relieve pressure from the BOT's 30-per-cent withholding measure on capital inflows. "The market hasn't seen a capital-control measure for a long time, particularly in terms of capital outflow, which isn't an acceptable instrument. But the measure hasn't affected the global market. It is specific only to the country," he said.

The research house projected that Thailand's economic growth rate this year would slow down in line with the global trend. The company forecast world economic growth of 3.5 per cent this year, down from last year's 4.5 per cent. It said Asia's growth rate would be 7.1 per cent this year, down from 8 per cent last year.

Meanwhile, Nitaya Pibulratanagit, the central bank's assistant governor in charge of its Financial Markets Operations Group, said new exemptions from the 30-per-cent withholding measure for fully hedged inflows into local bonds and mutual funds would be ready within 10 days.

She did not elaborate, but the central bank has said inflows to these markets would have to enter the country via foreign-exchange swap markets, insulating the value of the baht in the spot market from any associated volatility.

Nitaya said the central bank's intervention in the foreign-exchange market since the beginning of last month has been modest, since the aim was to moderate the rise of the baht, not to fight the trend.

"We've taken care of the baht's level, although not much, since the baht is on an upward trend, and we don't want it to be too strong too soon," she said.

Anoma Srisukkasem,

Somruedi Banchongduang

The Nation