Bank of Thailand likely to leave interest rates unchanged at 1.5 pct through 2018, says Commerzbank

The Bank of Thailand (BoT) is expected to leave the interest rates unchanged at 1.50 percent throughout this year and next, according to the latest research report from Commerzbank. Given the subdued inflation backdrop, the Bank of Thailand (BoT) has been able to keep rates stable this year.

However, BoT has dropped hints of late that they are contemplating removing some monetary accommodation in a preemptive move in anticipation of higher inflation and further US rate hikes. This was affirmed by the latest BoT minutes for August.

They revealed that policy members are wary of the risks of low rates and discussed the appropriate timing to commence hiking rates. We are in fact comforted by such comments and BoT’s thought process as they imply a credible and independent central bank that aims to stay on top of the issues.

The Thai baht is one of the most resilient Asian currencies this year, down only 0.8 percent vs USD as opposed to the average decline for Asian currencies of around 4 percent. However, the currency remains negative spillovers from the trade tensions and domestic politics e.g. increased investor nervousness if the planned general election for next year is further delayed.

"For now, we expect BoT to leave rates unchanged at 1.5 percent for the rest of the year and US/THB seen at around 32.50-33.30 in the near-term," the report commented.