Baht Reduces Gains, Then Stabilises After BoT Rate Decision

Spot USD/THB has stabilised after a BoT-induced rebound, last trading -0.030 at 35.640. A rally above Jan 24 high of 35.880 is needed to revive bullish impetus. Conversely, bears keep an eye on Feb 2 low of 35.237. Their case is supported by the recent move of the 50-DMA below the 200-DMA.

• The BoT voted 5-2 to keep its policy rate unchanged at 2.50%, with the two dissenters casting their votes in favour of a 25bp cut. The central bank defied pressure from the government to reduce borrowing costs and boost economic growth, but the presence of two dissenting votes may have applied some pressure to the baht.
• The MPC said that the economy "is projected to slow in 2024 from exports and manufacturing activity" while "domestic demand continues to expand and remains a key driver of the economy." Meanwhile, inflation "is projected to be lower than previously assessed" albeit this does not "reflect demand deficiency, as price declines are concentrated in relatively few product categories."
• MPC's Piti Disyatat said that the post-COVID recovery remains slow, but Thai monetary policy has a limited role in stimulating growth. He added that the key rate remains one of the lowest in the world, while the central bank does not see negative inflation readings as deflation.
• PM Srettha Thavisin maintained pressure on the BoT, commenting that he disagrees with today's decision. He added that the MPC is an independent body and that he has no preference on the next rate decision, which should be data-driven.