Baht Moves On After BoT Split-Vote Decision To Leave Key Rate On Hold

The Bank of Thailand kept its policy rate unchanged at 0.50% on Wednesday, as expected by most analysts and forecast in our preview, but the nearly evenly split vote suggested that policy tightening is drawing nigh.

• Although policymakers voted 4 to 3 to stand pat on rates this time (dissenters called for a 25bp hike), they opened the door to future tightening, noting that "a very accommodative monetary policy will be less needed going forward." While the Committee stuck with its view that inflation has accelerated mostly due to cost-push factors, but they will closely monitor "cost passthrough, and medium-term inflation expectations."
• The announcement briefly put a bid into the baht on Wednesday as the split vote provided evidence that the decision was finely balanced, although the MPC conceded that they are still discussing the "appropriate timing" of stimulus withdrawal. Post-BoT gains proved short-lived and the baht swung back into a loss.
• Looking into today's docket, focus turns to consumer confidence data from the University of the Thai Chamber of Commerce. The prior (April) reading marked an eight-month low as lingering concerns about COVID-19 and the Russian war in Ukraine weighed on sentiment.
• Spot USD/THB has crept higher to a multi-week high amid broader demand for the greenback. The pair last sits +0.033 at THB34.553. Further gains past May 18 high of THB34.682 would allow bulls to take aim at May 13 cycle high of THB34.783. Bears look for a fall towards May 30 low/May 5 low/round figure of THB34.048/34.018/34.000.