Thailand: Central Bank leaves rates unchanged in August
At its meeting on 21 August, the Monetary Policy Committee of the Bank of Thailand (BOT) voted six to one to maintain the policy rate at 2.50%, with one member voting for a 25 basis point cut. The hold matched June’s and aligned with market expectations.
The Bank’s decision was mainly driven by its expectation that inflation will rise and return to the 1.0–3.0% target range by the end of 2024, in spite of subdued agricultural prices due to favorable weather. Moreover, while it also expects core inflation to remain low, it sees this as being mainly due to supply factors rather than demand weakness. That said, regarding growth, the BOT’s assessment was downbeat, expecting activity to cool ahead and seeing downside risks to the private investment and consumption outlook.
The Bank did not provide specific forward guidance. Instead, it stated that it will closely monitor macroeconomic and financial developments, and consider the growth and inflation outlooks in future monetary policy decisions. The majority of our panelists see the Bank holding rates through year-end, while a minority see room for small cuts. The next meeting is set for 16 October.
Charnon Boonnuch and Euben Paracuelles, analysts at Nomura, expect the BOT to stay on hold this year and next:
“We maintain our forecast that the BOT will leave its policy rate unchanged at 2.5% in 2024-25, consistent with its guidance that the policy rate is neutral. In addition, there were no signs of a policy pivot today. Despite flagging growth concerns, the BOT reiterated that the outlook is consistent with its expectations, while the source of downward inflation pressures do not arise from weak demand conditions. All these factors, in our view, suggest that the bar for a cut remains high.”
Meanwhile, Enrico Tanuwidjaja and Sathit Talaengsatya, analysts at UOB, are slightly more dovish:
“Based on today’s policy decision, the BOT is expected to maintain the policy rate at 2.50% for the remainder of this year and throughout 2025 mainly to address concerns over high household debts. However, pressures for easing are increasing. In a more favorable external context, with the Fed expected to begin cutting rates in Sep 24, the BOT may consider a rate cut in 4Q24.”