Kasikorn Research Center (K-Research) is dismissing the likelihood of a Bank of Thailand (BoT) policy rate reduction at the upcoming April 10 meeting despite mounting expectations in the market for monetary policy easing. Concerns over a weakening baht have influenced this decision.
Kanjana Chockpisansin, who heads the research division focusing on the banking and financial sectors at the think tank, remarked that K-Research aligns with its parent organization, Kasikornbank, in anticipating that the Monetary Policy Committee (MPC) of the central bank will maintain the current interest rates at the upcoming meeting due to the relatively unchanged economic conditions since the previous gathering.
The MPC has thus far retained the policy rate at a decade-high of 2.5% in the last two meetings.
Although there have been discussions on the potential for a rate cut next week as Thailand’s economic performance faces challenges, particularly with setbacks to initiatives like the 10,000-baht digital wallet scheme, K-Research remains firm on its stance.
The World Bank’s recent downgrade of Thailand’s GDP growth projection for this year from 3.2% to 2.8% highlights a global trade deceleration and delays in fiscal budget disbursement as contributing factors.
Ms. Kanjana emphasized that Bank of Thailand officials are opting to assess economic conditions further and evaluate the timing for a potential economic recovery post-rate cut. Structural issues within the country and economic cycles are believed to be primary reasons for the current slowdown, with expectations that the impact of a rate cut may not be substantial.
Moreover, acting before the Federal Reserve, which is anticipated to make a move earliest in June, carries the risk of prompting capital outflows and placing additional pressure on the baht to depreciate further.
The Thai baht has experienced a 7% devaluation this year, hovering around a six-month low of 36.69 baht against the dollar as of Wednesday.
Market analysts from Kuala Lumpur-based Maybank projected a single policy rate reduction by the Bank of Thailand this year, followed by another cut in 2025, aiding in bolstering the performance of the Stock Exchange of Thailand (SET).
The research team at Maybank suggested that a domestic rate cut could propel the SET index’s performance, especially in conjunction with potential Fed rate adjustments this year. Historical data from previous rate-cut cycles in Thailand illustrated positive returns for the SET index in the months following the initial rate cut by the central bank.
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