BoT continues with dovish rhetoric

The Bank of Thailand left its policy rate unchanged at 1.50%. The decision was again unanimous, indicating that the MPC does not see any imminent need to cut rates.

However, the overall tone of the statement remained dovish, and with growth outturn in Q2 looking weak, the risks of a rate cut have risen, in our opinion. The BoT also flagged downside risks to the economy from weaker growth in China, and ongoing drought-like conditions, which could affect agriculture production. 

"The central bank continues to flag weaker exports as a key reason behind slower growth, although it says that a weaker THB should help at the margin. With leading indicators for Q2 GDP looking very weak, the Bank of Thailand will likely lower its full year growth forecast from 3.0% currently, though only after the Q2 GDP print is released on 17 August", says Barclays.

While the monetary policy stance remains highly accommodative, we believe the BoT remains ready to deploy further policy ammunition to support sentiment, if needed. 

"This has been reiterated by the BoT through the year, and given low commodity prices and negative inflation, the risk of a rate cut in Q4 after the US Fed meeting in September remain elevated. While we maintain our base case for the BoT to remain on hold thisyear, any reversal in THB weakness or further deterioration in the growth outlook in 2H could be triggers for rate cuts", added Barclays.