Thailand Monetary Policy May 2020

Thailand

Thailand: Central Bank cuts the policy rate to an all-time low in May

May 20, 2020

At its 20 May meeting, the Monetary Policy Committee of the Bank of Thailand (BoT) slashed the policy rate by 25 basis points to a fresh record low of 0.50%. The cut was in line with analysts’ expectations and the third so far this year. However, the decision was not unanimous as three out of the seven members favored no action

A bleaker-than-expected global economic backdrop amid the Covid-19 pandemic led the Bank to further cut the policy rate in order to boost liquidity and safeguard financial stability. Domestic demand is falling faster than previously thought by policymakers, as rising unemployment and pandemic control measures ravage consumption and investment. In turn, cheaper credit is required to alleviate liquidity issues of households and businesses, so once the worst of the crisis passes economic activity can resume promptly. Moreover, the disinflationary environment caused by the economic downturn provides the Bank with leeway to ramp up monetary stimulus.

Meanwhile, the Committee remarked that the additional liquidity measures, including a THB 400 billion (USD 12.3 billion) fund set up on 29 April, have stabilized financial markets. However, maintaining a high level of liquidity remains crucial in order for credit to reach those businesses and households most affected by the health crisis.

In its forward-looking guidance, the Committee struck a dovish tone, intending to carry out monetary policy through alternative tools if needed. The evolution of inflation, financial stability and the impact of the pandemic in foreign economies will determine the future actions of the Bank.

The next monetary policy meeting is scheduled for 24 June.

FocusEconomics Consensus Forecast panelists are still assessing the Bank’s latest move


Author:, Economist

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