Economist Manop Udomkerdmongkol at UOB Group assessed the recent interest rate decision by the bank of Thailand (BoT).
Key Quotes
“As widely expected, the Bank of Thailand (BoT) maintained the policy rate at 1.50%. The MPC’s vote was unanimous with seven members of the MPC voting in favour of the outcome. In its press briefing, the BoT indicated that an accommodative monetary policy stance would contribute to the continuation of economic growth and should support the rise of headline inflation towards target”.
“In the policy statement, the BoT viewed that the Thai economy expanded at a lower rate than previously assessed and below its potential. Exports contracted owing to the slowdown of global economy and the US-China trade dispute, consistent with the decline in manufacturing production, while tourism grew at a slower rate. Private consumption softened mainly due to declining household income and employment. Private investment expanded at a slower pace as a result of the continuing export contraction and moderating domestic demand while investment confidence softened. Public spending grew at a gradual pace owing partly to delay in state-owned enterprise investment projects”.
“The BoT has revised its forecast for 2019 GDP growth from 3.3% previously to 2.8%… For 2019, the BoT has cut its headline inflation forecast from 1.0% previously to 0.8%”.
“For the next policy meeting on 6 November 2019, the BoT will likely maintain the policy rate at 1.50% to gauge the transmission mechanism of monetary policy and the effects of fiscal stimulus measures first before considering the next move”.
“However, if incoming economic data remain sluggish over the coming months, we would likely see another cut by the BoT to take the policy rate to 1.25%, given that the MPC has signaled that the committee is ready to use policy tools if the situation significantly changes”.
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