Thailand: Unanimous consensus to keep rates near record-lows

The Bank of Thailand (BoT) Monetary Policy Committee has another policy meeting tomorrow (28 March), but it hasn’t changed rates since the 25bp rate cut to 1.5% in April 2015.

There is unanimous consensus that the central bank will not do anything at this meeting either which is why most analysts are likely to concentrate on the BoT policy statement for future policy move clues. And this is also why we're struggling to find strong reasons to change our view of no change in the BoT policy in 2018.

Firmer exports and manufacturing growth so far in 2018 may provide a further lift to the central bank’s growth optimism in the policy statement even as underlying fundamentals continue to be dogged by weak domestic demand which is also evident in persistent low inflation.

The central bank’s optimism on improving inflation trend this year also seems to be unfounded. The 0.7% year-to-date inflation in February was down from 1.5% a year ago. The BoT’s inflation target of 1- 4% remains at risk of not being achieved again this year (see chart). Therefore, it would hardly come as a surprise if the BoT moves to cut the inflation target itself.

The currency appreciation slowed in the last two months, but the Thai baht (THB) hasn’t been displaced from its top performing spot among Asian currencies with 4.6% year-to-date appreciation against the USD.

Strong currency will continue to dampen inflationary pressures from rising global commodity prices, especially oil price.