MNI Bank of Thailand Preview – February 2024: BoT Not In A Hurry To Ease

EXECUTIVE SUMMARY:

• The Bank of Thailand (BoT) is unanimously expected to keep rates at 2.5% at its February 7 meeting. It has said that policy is currently “appropriate” and “broadly neutral” and as it doesn’t see policy as restrictive, it has the option for a prolonged hold while keeping its options open.
• January CPI inflation was lower than expected falling to -1.1% y/y from -0.8% and core easing 0.1pp to +0.5% y/y. The government expects it to weaken further in February but BoT is not viewing this as deflation as the downtrend has been driven by subsidies and structural factors. It believes that reform and not rate cuts is needed to address low inflation.
• There is a lot of uncertainty around the timing and impact of the digital wallet scheme. It is estimated to be worth around 2.8% of GDP and was supposed to be fully rolled out by May but officials have said that this is now looking unlikely. BoT is likely to wait for a clearer picture on the impact and timing of the scheme before shifting to rate cuts, as it is unlikely to want to risk easing monetary policy simultaneously with fiscal policy given its potential effects on inflation and household debt.

See full preview here:

BoT Preview - February 2024.pdf