The Thai central bank met today for its monetary policy decision. As was widely anticipated, the Bank of Thailand kept its policy rate on hold at 1.75 percent. However, the decision was not unanimous. Four members of the monetary policy committee voted for no change, whereas two members voted for the rate to be hiked by 25 basis points, while one member was absent. The central bank last adjusted its policy rate in December by hiking the rate by 25 basis points, citing a desire to minimize financial stability risks and rebuild policy space.
The door to further tightening continues to open. The Thai central bank’s statement continued to flag worries regarding financial stability risks, noting that “there remained a need to monitor risks that might pose vulnerabilities to financial stability in the future”. In the meantime, the Thai central bank does not seem too concerned regarding the recent appreciation of baht or its effect on growth. According to the BoT statement, the strength of baht is “in line” with other EM currencies and that the economy should “continue expanding around its potential” despite external headwinds.
Nevertheless, any tightening might be very gradual given benign inflationary pressures, noted ANZ in a research report. Headline inflation has come below the central bank’s target band of 1 percent to 4 percent for three straight months. Core rate has remained low as well.
“Overall, the BoT’s next move will be data dependent and we will be closely monitoring how incoming economic data evolve in the coming months. For now, we are maintaining our forecast for one 25bp hike in 2019”, added ANZ.
