VIEW: HSBC Expecting Unchanged Rates In 2024

In the face of pressure from the government to cut rates, the Bank of Thailand left them at 2.5% in February and maintained its neutral stance although two members voted for a 25bp cut. HSBC notes that in 2014-15 a split MPC had an unchanged stance for 3 meetings. It continues to expect monetary policy to be on hold in 2024.

• “While acknowledging the downside risks to the outlook, we continue to expect the BoT to keep its policy rate steady for the whole duration of 2024. For one, we share the view with the BoT that the negative inflation figures are a result of the myriad of subsidies and price controls that are currently in place, and less due to overall demand stumbling.”
• “Although short-term growth is indeed a concern, we believe the BoT will continue to focus on long-term considerations. Household debt needs to decrease while private credit needs to cool to lessen the vulnerabilities in the economy.”
• “With the government intending to fiscally stimulate the economy through its Digital Wallet scheme, we expect the BoT to keep its monetary stance unchanged this year. Easing both monetary and fiscal policy simultaneously may, again, lead to further increases in household debt. But since short-term growth is still a concern, we think what may trigger the BoT to cut its policy rate is if the Digital Wallet scheme is shelved. In other words, we expect either monetary or fiscal policy to shore up growth, but not both.”
• “Without the Digital Wallet scheme, we expect growth in 2024 to be 2.6%. But with the scheme, growth will likely improve to 3.4%, which is in line with the BoT's view of 3-4% potential growth.”