BoT Remains Focused On The Outlook

The Bank of Thailand’s (BoT) August statement sounded more dovish without signalling imminent rate cuts. It seemed more concerned regarding growth, inflation and financial stability. Headline inflation is now “expected to decline relative to previous assessment” but Governor Sethaput said today that low inflation doesn’t mean deflation and that structural factors persist. BoT focuses on the outlook and not individual data points and Sethaput reiterated that saying that policy will be “outlook dependent”.

• Some forecasters brought forward BoT rate cut expectations following the August meeting. The Q3 Bloomberg survey published this week has 12bp of easing in Q4 2024 with a full 25bp by Q1 2025 and a total of 41bp by Q4 2025, so still modest. But 10 of the 27 responses expect a 25bp cut in Q4 2024.
• BoT easing requires the Fed to cut first, which is expected in September. While there are BoT meetings in October and December, Sethaput’s comments today didn’t sound like the central bank is in a hurry to ease. BoT will adjust monetary policy if needed and won’t be “dogmatic”. He noted that it also has other tools to complement monetary policy, which is set to achieve a number of outcomes.
• Disappointing economic growth could drive a more dovish stance. Sethaput said that the recovery is “uneven” and that there is a growing gap between consumption and manufacturing growth.
• Reducing the household debt ratio has been one of the reasons that BoT has kept rates around “neutral” and Sethaput today said that its aim is to bring it down to around 80% over the long term. Only a third of debt is mortgages with the majority from hire purchases and so BoT’s debt goal will remain important.