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THAILAND: VIEW: UOB Sees BoT On Hold In December With A Q1 2025 25bp Cut

THAILAND
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UOB revised down its 2024 Thai inflation forecast after the lower-than-expected October headline inflation print of 0.8% y/y. It should then pick up to 1.2% in 2025, which it revised down 0.1pp due to softer domestic demand. UOB believes the Bank of Thailand will leave rates on hold on December 18 but cut by another 25bp in Q1 2025 to support financial stability.

  • UOB notes “last year’s low base effect is expected to technically lift headline inflation back to the central bank’s target band of 1%-3% by the end of the fourth quarter of 2024. However, both the projected annual average inflation figure and the latest data reflect persistently weak demand-side pressures. This trend is likely to continue into 2025, as slow household income growth and tightened financial conditions weigh on private consumption against a backdrop of lingering debt overhang.”
  • “Additionally, the initial phase of the cash handout scheme is unlikely to generate significant upward pressure on prices, and the implementation of the program’s second phase remains uncertain.”
  • “We expect the central bank to keep the policy rate unchanged at the final MPC meeting of 2024 on 18 Dec, as it awaits additional economic data from the fourth quarter and monitors external developments, particularly the outcome of the U.S. election and Federal Reserve policy decisions.”
  • “The inflation outlook suggests that additional policy easing from the BOT may be warranted to stimulate domestic demand and support more robust growth.
  • “The MOC shared its views on the inflation outlook for 2024 based on the outturn in Oct. Headline inflation was projected to average below 0.5% for 2024. … The low base effect last year was expected to lift inflation in 4Q24. The MOC projected the inflation to increase in Nov and Dec gradually, and headline inflation could average 1.12% y/y in 4Q24.”
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UOB revised down its 2024 Thai inflation forecast after the lower-than-expected October headline inflation print of 0.8% y/y. It should then pick up to 1.2% in 2025, which it revised down 0.1pp due to softer domestic demand. UOB believes the Bank of Thailand will leave rates on hold on December 18 but cut by another 25bp in Q1 2025 to support financial stability.

  • UOB notes “last year’s low base effect is expected to technically lift headline inflation back to the central bank’s target band of 1%-3% by the end of the fourth quarter of 2024. However, both the projected annual average inflation figure and the latest data reflect persistently weak demand-side pressures. This trend is likely to continue into 2025, as slow household income growth and tightened financial conditions weigh on private consumption against a backdrop of lingering debt overhang.”
  • “Additionally, the initial phase of the cash handout scheme is unlikely to generate significant upward pressure on prices, and the implementation of the program’s second phase remains uncertain.”
  • “We expect the central bank to keep the policy rate unchanged at the final MPC meeting of 2024 on 18 Dec, as it awaits additional economic data from the fourth quarter and monitors external developments, particularly the outcome of the U.S. election and Federal Reserve policy decisions.”
  • “The inflation outlook suggests that additional policy easing from the BOT may be warranted to stimulate domestic demand and support more robust growth.
  • “The MOC shared its views on the inflation outlook for 2024 based on the outturn in Oct. Headline inflation was projected to average below 0.5% for 2024. … The low base effect last year was expected to lift inflation in 4Q24. The MOC projected the inflation to increase in Nov and Dec gradually, and headline inflation could average 1.12% y/y in 4Q24.”