Thailand: Central Bank keeps policy rate unchanged at September meeting
At its 29 September meeting, the Monetary Policy Committee of the Bank of Thailand (BoT) held the policy rate at the record low of 0.50% for the tenth consecutive meeting. The hold was widely expected by market analysts, and was unanimous across the Committee, after two of the seven members had voted for a 25 basis-point cut at the previous meeting in August.
The Bank decided that its accommodative monetary policy stance was still warranted amid an improving pandemic situation and easing restrictions, which should reduce downward pressure on the economy. As such, the Bank adopted a slightly more upbeat tone from its August statement, noting “significant progress on vaccination and earlier-than-expected relaxation of the containment measures”. To this end, it upgraded its GDP forecast for 2022 to 3.9% from 3.7% in its August report. Nevertheless, amid continued uncertainty around the pandemic, the BoT maintained its wait-and-see approach in order to continue supporting the economy.
In its communiqué, the Bank kept its forward guidance relatively unchanged, continuing to emphasize supporting the economic recovery and indicating that it would “stand ready to use additional appropriate monetary policy tools if necessary”. The majority of our panelists see the Bank holding rates steady until year-end.
Regarding the outlook, Charnon Boonnuch and Euben Paracuelles, economists at Nomura, now see a further cut as unlikely this year, stating:
“We no longer forecast a 25bp policy rate cut by the BoT and now expect the BoT to leave its policy rate unchanged at 0.5% in 2021 and through 2022. We think the bar to cut the policy rate further is high as the BoT continued to emphasize that financial measures—which we think refer to SME soft-loans, debt forbearance and debt restructuring—are more preferred to cutting the policy rate further. In addition, with faster vaccine rollouts and more reopenings underway, we think downside risks to the growth outlook are mitigated.”
The next monetary policy meeting is scheduled for 10 November.