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Thailand Monetary Policy March 2020

Thailand: Bank of Thailand stands pat in second meeting in March

At its 25 March meeting, the Monetary Policy Committee of the Bank of Thailand (BoT) opted to stand pat and keep the policy rate at a historic low of 0.75%. However, the decision was not unanimous as two members voted to lower the rate by 0.25 percentage points. This comes after the BoT cut its policy rate just days prior on 20 March.

The decision came despite expectations of deflation and a marked economic contraction owing to the coronavirus pandemic; the Bank now expects the economy to contact 5.3% this year and prices to drop 1.0% in the year as a whole. The Bank stressed that following past rate cuts, measures to address liquidity concerns now ought to take the forefront, adding that its previous liquidity measures helped stabilize financial markets. Regarding the economy, the Bank noted that the Covid-19 pandemic is expected to hammer tourism and exports, which will in turn spill over into domestic demand owing to loss of income dragging on private consumption and fixed investment expenditure. As such, the BoT judged that fiscal stimulus was another key instrument to combat the fallout.

In the press release, the Committee struck a dovish tone. It stated that it would continue to monitor inflation and the economic outlook—in particular the impact of the coronavirus pandemic—and was prepared to cut the policy rate further if necessary. The Bank also mentioned it could use alternative policy tools, including loan extensions by financial institutions, to support the economy.

The next monetary policy meeting is scheduled for 20 May.

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