MNI BoT Preview - June 2021: MPC To Stand Pat, Revise Projections

There is little more the Bank of Thailand can do to shore up the economy with conventional monetary policy tools. Although inflation returned to the target range and mass vaccinations against Covid-19 have begun, the road to recovery is long and rocky. It comes as good news that consumer-price growth returned to the Bank of Thailand's target range of% +1.0-3.0% Y/Y, but it must be noted that one of the main drags on inflation in May was a government subsidy for utility charges. Elsewhere, the annual economic contraction in the first quarter was slightly shallower than expected, but the outlook remains highly uncertain, with some red flags in high-frequency indicators. Meanwhile, only this month, Thailand's central bank extended debt relief measures for SMEs through the end of the year and held talks with the Prime Minister on measures to address piling household debt. In addition, the local press reported that the BoT considers reducing ceiling interest rates for some retail loan products and will debate the idea with financial sector representatives this week. We expect Thailand's central bank to continue providing targeted assistance to people and businesses affected by the outbreak of Covid-19, while leaving the main policy parameters on hold. The scale of widely expected revisions to the economic projections from March Monetary Policy Report will likely provide the main thing to watch on Wednesday. The MPC are set to downgrade their forecasts for both GDP growth and foreign tourist arrivals, after taking note of the adverse impact of the third wave of coronavirus during the previous policy meeting. That being said, the updated projections will remain highly conditional on the quickly evolving epidemiological dynamics.