Cut in interest rate this month unlikely: economists
Economists are forecasting that Thailand’s Monetary Policy Committee meeting on August 7 will maintain the country’s interest rate at 1.75 per cent despite the US FED cutting its interest rate last week.
“We believe that the MPC will maintain the country’s interest rate 1.75 per cent and that as the FED interest cut will have little impact on the country’s economy at this time,” Phatra Securities’ assistant managing director Pipat Luengnaruemitchai said.
He added that the country’s economy in June showed only slight growth and the two-per-cent growth in the second quarter of this year growth will be one of the factors that the MPC will consider.
“I believe that the MPC will cut the interest rate but not at the next meeting on August 7 because they will want to watch the economy in July before making a decision. I think they will choose to maintain the interest rate for now,” Pipat said.
Meanwhile, the country’s economy in the second half of this year will face more risks from both domestic and overseas factors such as the drought, which will directly impact domestic purchasing power, as well as low growth in the tourism sector.
The trade war between China and USA is also impacting exports and at best, these will only see a slight growth in the remainder of this year. All these factors will have a negative impact on the country’s economy for the second half of the year, he said.
“These factors will force the MPC to cut interest rate later on but not right away as it needs time to monitor and consider by how much to cut. It is also adopting a wait-and-see stance on how the government’s policy will boost the country’s economy in the rest of this year,” he said.
Siam Commercial Bank Economic Intelligence Center’s chief economist Kampol Adireksombat agreed, saying the MPC would have to cut interest rate to take account of low economic growth but this would probably be delayed until the September or October meeting.
“The MPC has to wait and see if the government’s policy to boost the country’s economy has sufficient impact,” he said.
He added that the latest trade war between USA and China would have a direct impact directly on the country’s export market for the rest of this year.
CIMB (Thailand)’s head of research office Amonthep Chawla predicted that the MPC will cut the interest rate in December if the economy in the third quarter remained slow and if the government’s measures did nothing to improve it.
However, the Bank of Auydhya’s chief economist and head of research division Somprawin Manprasert does not think the MPC will cut the interest rate this year, as the country’s interest rate is still lower than that of other countries.
“Although FED cut its interest rate, I believe that the MPC will not cut interest rates this year after increasing it by 0.5 per cent early this year. The country’s economy is still showing average growth of three per cent but if it goes lower, that could lead the MPC to make a decision to make a cut,” he said.
