By Pranoy Krishna
BENGALURU- The Bank of Thailand (BOT) will keep interest rates unchanged on Wednesday and through Q1 2025 to balance growth with inflation control while assessing the impact of ongoing political instability on the economy, a Reuters poll found.
While inflation, at 0.83 percent in July, remained below the BOT’s target range of 1 percent -3 percent , Governor SethaputSuthiwartnarueput said the current interest rate is appropriate and there is no need to cut despite the government’s repeated calls to lower it.
With growing political uncertainty following the dismissal of Thai Prime Minister SretthaThavisin, the BOT – previously bickering with Srettha’s government over the scale of cash handouts to tackle high household debt – will remain in a wait-and-watch mode to assess the impact on the economy.
Thailand’s parliament elected Paetongtarn Shinawatra as its youngest prime minister on Friday, daughter of divisive political heavyweight Thaksin Shinawatra.
All but three of the 27 economists in the Aug. 8-16 Reuters poll expected the BOT to keep its benchmark one-day repurchase rate unchanged at 2.50 percent on Aug. 21.
Three economists predicted a 25 basis point cut.
“We are not anticipating any policy rate changes. A lot will depend on the growth outlook.
If political calm prevails … the BOT is likely to keep its policy rate on hold through 2024, before modest rate cuts in mid-2025 when growth is likely to slow,” wrote Khoon Goh, head of Asia research at ANZ.
“However, intensifying political risks in the coming weeks and disruptions in fiscal policy implementation would strengthen the case for a recalibration in monetary policy settings sooner rather than later.”
Still, a weak Thai baht, which is down about 2 percent against the US dollar so far this year, suggests any move before the US Federal Reserve’s expected policy easing in September will likely be inflationary.
“We do not expect the BOT to ease aggressively or make a preemptive rate cut ahead of the US Federal Reserve. By easing along with the Fed, the BOT can avoid putting additional downward pressure on the baht,” wrote Eugene Tan, associate economist at Moody’s Analytics.
