VIEW: JP Morgan Tightening Done, Cuts Highly Dependent

The Bank of Thailand unanimously agreed to keep rates at 2.5% at its November 29 meeting. JP Morgan observes that the statement was less hawkish and that the 2023 growth and inflation outlook was revised down due to the “slower-than-expected recovery in merchandise exports and tourism (especially from China)”. Regarding 2024, BoT provided two scenarios.

• “With regards to 2024 projections, the BoT outlined two scenarios: the first, where growth (3.8%) and inflation (headline CPI: 2.2%; core CPI: 1.5%) rise if the digital wallet scheme is implemented, and the second, where growth (3.2%) and inflation (headline CPI: 2.0%; core CPI: 1.2%) pick up more gradually without the stimulus program.”
• “Based on the BoT’s updated 2024 core CPI forecast of 1.5%, our model-implied policy rate has come down from 2.25-2.50% to 2.0% (Figure 2), making the current policy settings slightly restrictive.”
• “While our analysis shows that the policy stance has become slightly restrictive, we think that the MPC will stand pat (at a level they deem as neutral) until there is sufficient clarity on the status of the digital wallet scheme (around March-May 2024). … if the digital wallet scheme is delayed/cancelled in a non-recessionary environment … we would tentatively bake in a 25bp rate cut in 2H24…”