BoT likely to witness pressure on rate cut if Fed eases monetary policy aggressively, says Commerzbank

If the United States’ Federal Reserve eases the monetary policy aggressively, the pressure on the Bank of Thailand (BoT) to cut rates will be tremendous, according to the latest research report from Commerzbank.

The BoT remained on hold yesterday, in line with market expectations. However, the central bank lowered the growth forecast to 3.3 percent for 2019 from 3.9 percent, and projected zero export growth this year compared with previous forecast at 3 percent growth.

In addition, the central bank also warned that a currency appreciation (THB gained almost 6 percent this year versus USD) could be harmful for exports. All told, the central bank signals that it could join the easing camp sooner than expected, the report added.

Notably, before yesterday's rate decision meeting, Deputy Prime Minister Somkid Jatusripitak told reporters "the central bank will need to cut the benchmark rate". "It can't go against the trend, if the economic situation continues to be like this," Somkid said, adding the easing is needed this year.

This makes another case that the central bank faces political pressure when conducting monetary policies. However, the rate decision yesterday was a unanimous call among the MPC members. Given the current economic and political backdrop, the Fed's action in July could indicate BOT's next move, Commerzbank further noted in the report.