BOT tipped to keep policy rate on hold
THE Bank of Thailand’s (BOT) Monetary Policy Committee (MPC) will likely keep its policy interest rate on hold when it meets tomorrow, say economists, who also expect the committee will upgrade its economic growth forecast for this year.
HSBC economist Jingyang Chen said in a report that the company expects the central bank to stay put on interest rates at the MPC’s final meeting of 2017, while revising upwards its estimate for 2017 growth in gross domestic product.
The BOT said recently that the economy might expand as much as 4 per cent this year if double-digit growth in merchandise exports continues throughout out the fourth quarter of this year.
As customs exports sustained expansion in the double digits in October and November, HSBC expects the central bank to upgrade its 2017 growth forecast from 3.8 per cent to at least 3.9 per cent in its new round of quarterly economic forecasts, due tomorrow.
The country’s headline inflation picked up quite rapidly in the second half of this year, and is on track to meet HSBC forecasts of 0.7 per cent this year and 1.3 per cent in 2018. But the recent inflation developments have been led mainly by supply-side factors - notably an increase in prices for oil and primary commodities, as well as a normalisation in those for unprocessed food.
HSBC said it its confident that the central bank can comfortably keep the policy rate on hold next year, as the growth and inflation outlook improves. While other central banks in the region may have to make difficult rate decisions, things should be more straightforward for the Bank of Thailand due to favourable growth and an inflation mix, as both are set to meet the BOT’s 2017 forecasts.
“We expect the Bank of Thailand to hold the policy rate unchanged at 1.5 per cent through 2018,” HSBC said.
The bank’s research added that Thailand’s overall financial stability remains sound, but a high level of household debt, uncertainties around baht appreciation and worsening debt serviceability among small and medium-sized enterprises (SMEs) pose potential downside risks to financial stability and growth.
“We expect the Bank of Thailand to step up efforts to prevent excessive currency movements and encourage recycling of the large current account surplus, while cooperating with the government and state-owned banks to support SMEs,” research said.
Krungsri Global Market of Bank of Ayudhya also believes that the MPC will keep the policy rate on hold at tomorrow’s meeting, given the strength in the global economic recovery.
