Analysts said the Bank of Thailand’s Monetary Policy Committee (MPC) will likely hold the country’s benchmark lending rate at 0.5 per cent at its next meeting on Wednesday.
Kasikorn Research Center said the MPC will maintain the policy interest rate as they are waiting to see the effects of the momentary and fiscal measures that have been introduced.
For monetary policy, this includes the 25 basis point policy rate cut in May and the central bank’s measures to help debtors. The latter includes a moratorium, low interest for loans and debt restructuring programs.
The government’s fiscal measures to counter the coronavirus outbreak’s impact on the economy has amounted to around 1.5 trillion baht.
This includes the latest measures to stimulate domestic travelling valued at 22 billion baht which was introduced last week and the 1 trillion baht emergency loan that was introduced earlier.
Sornchai Suneta, Managing Director of the Chief Investment Officer at Siam Commercial bank, told Thai Enquirer that the MPC will maintain the rate as the economic numbers for the second quarter have yet to come out.
“They will wait to see these numbers first since everyone expects that the second quarter to be the worse quarter [in 2020] because of the lockdown between March and May,” he said.
He anticipates the MPC to make another cut later on in 2020 but it will not go as far down to a flat rate as the global economy has already shown signs of improving after the second quarter.
“If there is a potential that global economy will pick up then there is no point in cutting it any further and we should keep this bullet in case of another emergency,” he added.
Sornchai said such an emergency could include the possibility of a second wave of infections but he believes that the impact will be less this time around.
“They would want to keep this policy space to use when it is truly needed,” he said.
“At the same time, lowering the rate would not help the economy at the moment when other monetary policies such as quantitative easing measures are more effective anyway,” he added.
Tim Leelahaphan, a Thailand economist at Standard Chartered Bank, told Thai Enquirer the MPC will maintain the rate because the vote was a close 4:3 last time.
The BOT could also lower its GDP prediction for the Thai economy in 2020 from the current recession of 5.3 per cent as well.
“They would maintain but they could also be aggressive in term of GDP prediction for the year as they did last time,” he said.
“However, what is more interesting is their views for [2021],” he added.
In addition, the BOT might introduce measures to slow down the outflow of gold that is contributing to the strengthening of the baht in previous months.
Standard Chartered also predicts another cut in the third quarter, from 0.5 per cent down to 0.25 per cent as the GDP will contract, inflation will be in the negative zone, and the baht will continue to be strong.
“Maintaining the rate this Wednesday means they will have room to lower it in the third quarter,” Tim said.
The baht traded down from 30 baht per greenback at the beginning of 2020 to 33 baht per US dollar on April 1.
With the outbreak situation improving and the returning economic activities, the baht has now picked up from 32.5 baht at the beginning of May, to around 31 baht on Monday afternoon.
