VIEW: JP Morgan Sees Case For Easing

The Bank of Thailand left rates at 2.5% as was unanimously expected but the vote was not unanimous with 2 members voting for a 25bp cut. The statement made it clear that disappointing growth and deflation were not due to domestic demand, but global factors and structural reasons, and thus monetary easing would not be able to boost them. JP Morgan sees the “structural headwinds starting to bleed into the cyclical outlook” and as such the “case for easing is intact”.

• “Although the BoT has produced counter-arguments against premature easing, there are references in the statement (e.g., heightened uncertainties associated with cyclical factors) that create an opening for easing later in the year. We maintain that the central bank will deliver 50bps of rate cuts in 2H24, premised on the likelihood that the digital wallet scheme will not be implemented this year due to execution and legal roadblocks.”
• “The cyclical strength in the domestic economy may also be overstated, given the lack of breadth in the private consumption recovery. We are particularly concerned by the downshift in consumer durables spending and the recent stalling in services and non-resident spending, despite the improvement in tourist arrivals.”
• “Long-term macro-financial stability concerns do require tighter policy in terms of lending standards and macro-prudential measures, but in a deteriorating cyclical backdrop, policy rate cuts could help in alleviating the debt servicing burden.”