Growing optimism over the economic rebound, subdued inflationary pressure and household debt concerns could encourage the Bank of Thailand to keep its policy rate unchanged at today's meeting and for the next two quarters, according to HSBC.
"The probability of further rate cuts in this cycle is low. Moreover, policymakers remain concerned about household debt and want to discourage excessive borrowing, even if it boosts GDP growth," HSBC economist Nalin Chuchotitham said in a paper.
All economists forecast that the Monetary Policy Committee (MPC) will leave the rate on hold at 2% today for a third straight meeting.
The committee is likely to reiterate the necessity for its accommodative stance but also highlight challenges and keep its policy options open amid a slew of uncertainties, Ms Nalin said.
A nascent exports and tourism recovery, household spending constrained by high debt levels and low income growth, and the ongoing economic reform — particularly in the energy sector — are among uncertainties.
The economy is regaining momentum as private sector sentiment has picked up since the military's takeover of administrative power brought a resumption of state spending. The global economic improvement is also boosting confidence. However, June's economic readings showed the economy is recovering at a gradual pace.
"June's data showed that private consumption and investment spending had declined slightly, after rising in May, indicative of an unsteady recovery trend," said Ms Nalin.
"While the data were not as positive as hoped, they were not a surprise, as household income growth remains weak while debt levels remain high. Lower expenditure on durables such as electrical appliances and vehicles also reflected this trend."
A contraction in manufacturing output and low capacity utilisation rate in the second quarter indicated that there is still substantial spare capacity in many sectors, which is part of the reason for the slow recovery of private investment.
However, optimism is still rising as businesses and consumers look towards a stronger economic revival next year.
The Board of Investment's acceleration of investment incentive approvals and increasing clarity on infrastructure investment have stoked expectations of solid growth in 2015, though the junta still needs time to complete its financing plan and public spending is expected to kick-start in the final quarter.
Ms Nalin said the central bank's worries over household debt, which reached 82.7% of GDP at the end of the first quarter, will make it likely to discourage more of such debt, especially as the most affected are low-income earners who need more time to strengthen their balance sheets.
"The MPC can continue its accommodative stance to make sure that economic recovery is on a stronger path before starting to normalise its policy," she said.