Analysts are agreed there's little likelihood of more hikes this year

Now that the Bank of Thailand (BOT) has increased its policy inter¬est rate by 0.25 per cent to 3.75 per cent, bankers believe there will be no further rate increase this year; indeed Standard Chartered Bank (Thai) (SCBT) believes the rate will be held unchanged until the first half of next year and cut 50 basis points in the second half.

Thus deposi¬tors can put more of their money in medium to longterm fixed deposits without worrying about missing deposit products with higher returns than the current level.

Usara Wilaipich, senior econo¬mist at SCBT, believes the BOT has already ended its ratehike cycle, given the statement from the Monetary Policy Committee that "rate hikes are enough to control inflation … and slow the need for future rate rises". The committee also deemed that the decline in oil prices would reduce inflationary pressure in the immediate future.

Meanwhile, the economy has shown signs of slowing in the second half of this year as domestic demand continues to soften, also persuading banks that the BOT has done with its ratehike cycle.

"We expect the BOT to hold the rate until the first half of next year before cutting another 50 basis points in the sec¬ond half. In our view, policy focus will then start to shift from inflation to growth. Inflationary pres¬sure should ease steadily in coming quarters, provid¬ed commodity prices are stable and excise is cut. These factors will reduce inflation from an average of 6.4 per cent in 2008 to 3.8 per cent in 2009. Core inflation is expected to be within the target of 3.5 per cent," Usara said.

Usara suggested longterm fixed deposits to lock in returns in the long run. Several banks are offering spe¬cial deposit rates for several maturi¬ties.

Sakchai Peechapat, executive vice president and head of retail banking at Tisco Bank, said the bank believed the recent rate hike by the BOT was the last one this year.

Inflation has slowed because of the fall in oil prices, he said, and bond yields are reflecting future rates as the shortterm bond yield is stable while medium to longterm bond yields are down, which means the market forecasts interestrate sta¬bility.

"In September some banks may adjust the rate once again. People preferring fixed deposits should con¬sider six to 12 months. Megaproj¬ects are still a factor should they need money in the market, which may later affect the interest rate," Sakchai said.

Tinnakorn Boonyakalin, senior vice president and manager of per¬sonal loans at Krung Thai Bank, believes there will be no more inter¬est adjustment this year because it is time to help savers.

He said deposit rates had already been increased but lending rate had not. However, his bank will not take the lead in raising lending rate because it considers the current spread acceptable.

"If you want to deposit for four to five months, now's the time: the interest rate will probably not be adjusted. We shall, however, be reconsidering the trend in interest rate in the new year," Tinnakorn said.

Yaowaluck Poolthong, head of corporate communications and investor relations at the Bank of Ayudhya, said the bank's research suggested that the maximum policy interest rate was 3.75 per cent, so that, barring the unexpected, inter¬est rates would be stable for the rest of the year.