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THAILAND: BoT Likely To Defy Political Pressure To Cut Rates

THAILAND
EM BulletAPACEmerging Market NewsBulletMarketsFixed Income BulletsThailand

The Bank of Thailand (BoT) is widely expected to leave rates at 2.25% today after cutting them 25bp in October (see MNI BoT Preview). It has been clear that a neutral stance is consistent with both the growth and inflation outlook. Governor Sethaput also said that the bar is “reasonably high” for further easing. Headline inflation is gradually returning to the bottom of the 1-3% band and growth appears to be improving.

  • Growth has trended higher over the last year which gives BoT room to hold rates despite ongoing political pressure. Q3 GDP rose 1.2% q/q (sa) lifting the annual rate to 2.9% from 2.2%, the highest in two years. It was supported by government spending, investment and exports, while private consumption growth slowed.
  • Consumer confidence is signalling a possible turn in household spending plus fiscal measures should provide support for a recovery. Tourism numbers are also expected to continue growing.
  • However business and consumer confidence close to neutral plus downside risks to the export outlook from the threat of protectionism may derail Thailand’s tentative recovery. Fiscal policy is likely to remain supportive though.
  • Inflation has been very low at 0.9% y/y and 0.8% y/y in November for headline and core respectively. BoT expects the former to reach the band in December (released January 6) supported by higher food prices due to weather events and energy from base effects. Imported inflation is negative though.
  • There had been some talk of changing BoT’s target band but it was agreed to leave it at 1-3%.
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The Bank of Thailand (BoT) is widely expected to leave rates at 2.25% today after cutting them 25bp in October (see MNI BoT Preview). It has been clear that a neutral stance is consistent with both the growth and inflation outlook. Governor Sethaput also said that the bar is “reasonably high” for further easing. Headline inflation is gradually returning to the bottom of the 1-3% band and growth appears to be improving.

  • Growth has trended higher over the last year which gives BoT room to hold rates despite ongoing political pressure. Q3 GDP rose 1.2% q/q (sa) lifting the annual rate to 2.9% from 2.2%, the highest in two years. It was supported by government spending, investment and exports, while private consumption growth slowed.
  • Consumer confidence is signalling a possible turn in household spending plus fiscal measures should provide support for a recovery. Tourism numbers are also expected to continue growing.
  • However business and consumer confidence close to neutral plus downside risks to the export outlook from the threat of protectionism may derail Thailand’s tentative recovery. Fiscal policy is likely to remain supportive though.
  • Inflation has been very low at 0.9% y/y and 0.8% y/y in November for headline and core respectively. BoT expects the former to reach the band in December (released January 6) supported by higher food prices due to weather events and energy from base effects. Imported inflation is negative though.
  • There had been some talk of changing BoT’s target band but it was agreed to leave it at 1-3%.