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THAILAND: VIEW: Goldman Sachs Believes BoT On Hold Now, Risks To Downside

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The Bank of Thailand cut rates 25bp to 2.0% at its February meeting, while consensus looked for no change. Goldman Sachs had expected this move, but it now expects BoT to leave rates at 2.0% through 2025 “as the central bank is likely to want to preserve some policy space” but the risks are skewed to the downside.

  • Goldman Sachs sees the risks to its forecast of unchanged Thai policy rates towards “a more dovish central bank (more cuts) especially if there is further deterioration in the domestic economy.”
  • “In the forward guidance, the central bank stated that today's decision is "consistent" with the current economic assessment and "remains robust to risks going forward". In the press conference, the BoT noted that they do not have much monetary policy space and the bar to cut at the next meeting is "high". BoT further note that this is not the start of easing cycle and the policy rate is still within a neutral range.”
  • “The press release noted that today's decision would help ease financial constraints with growth in 2025 likely to be slower than BoT previously forecasted. The growth slowdown is mainly due to drag from the manufacturing sector given the structural issues in the economy (e.g. competitiveness).”
  • “In the Q&A session, the BoT spokesperson said growth for 2025 is likely to be around 2.5% or slightly above (vs. 2.9% previously; GSe: 2.4%).”
  • Headline inflation is likely to come closer to the lower end of the BoT target band of 1-3% at 1.1% in 2025 (GSe: 1.2%). Downside risk to inflation from potentially lower global crude oil price.”
  • “The BoT reiterated that it will closely monitor the development in financial market and movement of THB amid the increase in volatility.”
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The Bank of Thailand cut rates 25bp to 2.0% at its February meeting, while consensus looked for no change. Goldman Sachs had expected this move, but it now expects BoT to leave rates at 2.0% through 2025 “as the central bank is likely to want to preserve some policy space” but the risks are skewed to the downside.

  • Goldman Sachs sees the risks to its forecast of unchanged Thai policy rates towards “a more dovish central bank (more cuts) especially if there is further deterioration in the domestic economy.”
  • “In the forward guidance, the central bank stated that today's decision is "consistent" with the current economic assessment and "remains robust to risks going forward". In the press conference, the BoT noted that they do not have much monetary policy space and the bar to cut at the next meeting is "high". BoT further note that this is not the start of easing cycle and the policy rate is still within a neutral range.”
  • “The press release noted that today's decision would help ease financial constraints with growth in 2025 likely to be slower than BoT previously forecasted. The growth slowdown is mainly due to drag from the manufacturing sector given the structural issues in the economy (e.g. competitiveness).”
  • “In the Q&A session, the BoT spokesperson said growth for 2025 is likely to be around 2.5% or slightly above (vs. 2.9% previously; GSe: 2.4%).”
  • Headline inflation is likely to come closer to the lower end of the BoT target band of 1-3% at 1.1% in 2025 (GSe: 1.2%). Downside risk to inflation from potentially lower global crude oil price.”
  • “The BoT reiterated that it will closely monitor the development in financial market and movement of THB amid the increase in volatility.”