Views Article – Sharenet Wealth

Asia, Forex

Thai seen holding key rate despite slow growth, strong baht

* reuters://realtime/verb=Open/url=cpurl://apps.cp./Apps/cb-polls?RIC=THCBIR%3DECI poll data

* 14 analysts see rate remaining 1.75%; one expects 25 bps cut

* December’s 25 bps rate hike was the first since 2011

* Growth slows, baht climbs but financial risks persist

* Decision due on Wednesday, Aug 7, around 0700 GMT

By Orathai Sriring

BANGKOK, Aug 5 (Reuters) – Thailand’s central bank is expected to keep its benchmark policy rate steady on Wednesday for a fifth straight meeting, a Reuters poll showed, despite sagging growth, a strong baht and easing moves by other Asian central banks.

In the survey, 14 of 15 economists predicted the Bank of Thailand (BOT)’s monetary policy committee (MPC) will keep its one-day repurchase rate at 1.75% – half a point above the record low. The other forecast a quarter-point cut.

Since a rate hike in December – the first since 2011 – the MPC has left it unchanged, saying policy is still accommodative.

While slower growth, below-target inflation and the baht’s strength support a rate cut, policymakers have voiced concern about financial stability risks and high household debt.

BOT Governor Veerathai Santiprabhob said rates are already low and cutting would not help much.

Analysts say the bank may wait for the government to boost growth while it uses more tools to curb baht strength if measures unveiled last month fail to do so.

The BOT has downplayed rate cut expectations, “taking a wait-and-see approach until the government starts to roll out its fiscal stimulus measures,” said Sarun Sunansathaporn, economist of Bank of Ayudhya.

Sarun sees the BOT holding the rate throughout 2019, as did eight of 10 economists in the poll giving a year-end view.

Rather than a rate change, Nomura economist Charnon Boonnuch in Singapore expects Wednesday’s statement tone to reflect BOT’s “more cautious view” on the outlook, given escalating U.S.-China trade tensions.

In June, the BOT cuts its 2019 economic growth forecast to 3.3% from 3.8%, and predicted zero export growth.

But last week, BOT official Don Nakornthab said exports might contract this year and second-quarter growth was likely below January-March’s 2.8%, the weakest in over four years.

Southeast Asia’s second-biggest economy grew 4.1% last year.

Tim Leelahaphan, Standard Chartered economist, expects a rate hold but said but there might be dissenters favouring a cut.

HSBC, in a note, predicted a policy change by year-end, likely next month.

ING sees one 25-basis point cut on Wednesday and another in the final quarter, as data shows “the economy needs some policy stimulus”, Prakash Sakpal in Singapore said in a note.

Cuts could help the BOT curb the baht’s appreciation pressure, he said, adding that recent regulatory measures are “proving to be ineffective”.

The baht is Asia’s best-performing currency this year, appreciating about 5.7% against the dollar.

(Additional reporting by Satawasin Staporncharnchai; Editing by Richard Borsuk)

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