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Bank of Thailand likely to hold key rate, as expected

Published: June 24, 2019 13:15:37 | Updated: July 08, 2019 11:57:53


File Photo (Collected)

Thailand’s central bank is expected to keep its benchmark policy rate steady on Wednesday for a fourth straight meeting, a Reuters poll showed.

Bank of Thailand (BOT), the central bank of the country, is likely to hold the rate despite slowing growth and the way many Asian central banks have shifted toward easing policy.

In the survey, 14 economists predicted the BOT’s monetary policy committee (MPC) will keep its one-day repurchase rate at 1.75 per cent - half a point above the record low.

One analyst forecast a quarter-point cut on weaker growth, reports Reuters.

The MPC raised the policy rate in December for the first time since 2011, by 25 basis points, but has since held it steady, saying policy will depend on economic data.

While faltering growth and low inflation, with the headline rate just 1.15 per cent in May, support policy easing, the BOT has reiterated concerns about financial stability risks and high household debt.

Charnon Boonnuch, economist of Nomura in Singapore, sees no policy change the rest of this year, though he expects an outlook downgrade by the central bank.

Last month, the BOT said 2019 economic growth would be less than its forecast of 3.8%. It will give a new projection on Wednesday. Last year’s growth was 4.1 per cent.

Southeast Asia’s second-largest economy grew just 2.8 per cent in the first quarter, the weakest annual pace in over four years, as exports declined amid trade tensions.

Domestic political uncertainty remains after a March election as junta chief-turned-civilian prime minister Prayuth Chan-ocha will lead a fragile coalition. His cabinet line-up is expected to be announced by next month.

The central bank will be hoping that the new government does “more of the heavy lifting” with measures to try to stimulate growth, said Kobsidthi Silpachai, head of capital markets research of Kasikornbank, which expects no BOT policy change this year.

HSBC said the recent dovish tilt from most central banks and a potential further deceleration in global and domestic growth, could prompt the BOT to “reverse course” on monetary policy in future.

ING sees a cut as soon as this week, “if only to reverse the 25 bp rate hike from late 2018,” economist Prakash Sakpal in Singapore said in a note.

“It’s hard to imagine the BOT ignoring the 1Q GDP data, while activity data for the second quarter doesn’t offer much hope that the worst is over”.

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