The Monetary Policy Committee (MPC) is expected to raise the policy interest rate for the first time in two years by 0.25% on Wednesday to 0.75%, as inflation soared above 7% in the last two months, bringing an end to a low-interest era, analysts say.
The increase is in line with the projection that the US Federal Reserve (Fed) would lift rates by 0.75% at its next meeting in September as it struggles to tame inflation amid a job market recovery.
Wilasinee Boonmasungsong, research director of Globlex Securities, projects the interest rate to be raised from 0.50% as the MPC aims to bring down inflation.
The US reported a substantially high employment number last week, particularly in the non-farm payroll, with the unemployment rate falling to 3.5% against analysts' forecast of 3.6%.
Non-farm payroll increased 528,000 jobs in July -- more than double analysts' estimates of 258,000, prompting investors to believe that the Fed might lift the rate further.
At the moment, investors are keeping a close eye on the latest US inflation numbers which are scheduled to be announced later this week.
Ms Wilasinee, meanwhile, recommend banking stocks for investors during this period of time as banks would benefit from the central bank's lifting of the dividend payment ceiling and the rising interest rate trend.
Shares of large banks, such as Kasikornbank, Bangkok Bank, Krung Thai Bank, Siam Commercial Bank and Tisco Financial Group, are strongly recommended.
Since the beginning of the year, the global oil prices as well as commodity prices have soared due mainly to the Russia-Ukraine war. Food prices hit a record high around the March-April period. The Thai exchange rate, meanwhile, has been fluctuating, adding pressure to imports of raw materials, such as metals.
The Federation of Thai Industries has kept its eyes on the chip shortage situation faced by the automotive industry after China stopped exporting raw sand to Taiwan, the world's chip manufacturing hub, as tension rose following the visit of US House Speaker Nancy Pelosi to Taiwan last week.
The halt in the export of raw sand caused the cost of Taiwan-made chips to surge and so the prices.
Additionally, investors have been monitoring the second-quarter and six-month financial results of listed companies. Aug 15 is the last date for companies to release their financial statements.
Kobsak Pootrakul, senior executive vice-president of Bangkok Bank and chairman of Federation of Thai Capital Market Organizations, shared the same view as Globlex, saying the rate would be on the rise after today's expected hike.
Several central banks around the world have been steadily raising their rates to date this year due to inflationary pressures.
However, how much the rate would increase depends on the MPC's decision, Mr Kobsak said, adding that the main factor determining the rate hikes is the tendency of domestic inflation.
"It's good news that Thailand is about to raise interest rates to help lower the inflation rate. So far, skyrocketing inflation has caused the cost of living to rise substantially," said Mr Kobsak "If Thai inflation is likely to fall, it would allow the MPC to gradually raise the rate further without rushing and much pressure as the Fed and other central banks have experienced."
So far, the Fed and other central banks have raised interest rates quickly and sharply and that has resulted in market volatility and strong fund flows to the US dollar market, he said.
