BoT Saw More Benefit From Financial Steps Than Rate Cut

The Bank of Thailand have released the minutes from their latest monetary policy meeting, which saw them hold the policy rate unchanged at 0.50%. The decision was made by a split 4-2 vote, with two dovish dissenters and one absence.

• The MPC noted that "while the global economy would continue to recover, growth divergence between major advanced economies and Asian economies would be more apparent" and warned against potential impact from new virus mutations and limited access to vaccines.
• The Committee said that "the baht depreciated against the US dollar more than regional currencies due to an intensifiedCOVID-19 outbreak situation and the outlook of slow economic recovery in Thailand".
• Policymakers judged that "looking ahead, volatility in the global financial markets would remain high and could weigh on the Thai financial markets".
• Interestingly, the MPC flagged the risk of Fed tightening despite recently releasing a research paper noting that interest rate spreads should not have much impact on foreign fund flows into Thailand.
• The Committee "assessed that the impacts of the COVID-19 outbreak on the Thai economy were larger than the previous assessment, and there remained significant downside risks that the outbreak could become more severe and prolonged than expected".
• According to the minutes "most members viewed that financial measures would be more effective than a further reduction in the policy rate which was already low and thus voted to maintain the policy rate". Nevertheless, "two members voted for a policy rate reduction as a supplement to other measures in shoring up the economy and mitigate heightened risks in the period ahead".