Rate movement unclear: DBS
DBS economist appeared to have a mixed view whether the Bank of Thailand would maintain or cut the policy rate at the meeting tomorrow.
While noting that a lower rate may not help boost the economy, Gundy Cahyadi said the central bank may axe the rate to further weaken the baht.
He acknowledged that the current policy rate is 25 basis points higher than the all-time low of 1.25 per cent during the 2008-09 crisis. "Trimming interest rates further, to boost GDP growth, may no longer make sense if underlying demand in the private sector is weak anyway. The government’s more aggressive fiscal policy will help but, clearly, a time lag would be hardly surprising," he said.
Yet, he said that the temptation to cut rate apparently persists when it comes to the foreign exchange rate.
"It is a little tricky when current account (C/A) surplus may be closer to 4 per cent of GDP this year, up from 3.2 per cent last year. Tourism receipts remain strong and demand for goods imports is weak. The central bank has already eased outward foreign investment restrictions for Thai residents this year," he said.
At 4.30pm today, the baht was traded at Bt35.57, compared to Bt36.5 on October 1.
Most economists believed that the rate would be unchanged at the meeting tomorrow. Tisco Securities expected no change until next year, given that some economic indicators showed improvement in September.
