Thailand: BoT poised to make further rate cuts

• The Bank of Thailand still has monetary policy space for further rate cuts to cushion the impacts from the Covid-19 outbreak and the central bank will take into account the US Federal Reserve’s emergency rate cut at its upcoming meeting, says a senior official at the Finance Ministry.
• The rate cut would support the Finance Ministry’s recently launched relief measures and the second phase, which will be announced soon, said Lavaron Sangsnit, director-general of the Fiscal Policy Office (FPO).
• Mr Lavaron said the Finance Ministry will seek measures to aid those affected by the outbreak and grassroots people, who bear the brunt, are the ministry’s focus. Salaried workers are affected but less so than farmers and the self-employed.
• The ministry is expediting relief measures for the second phase to bring before the cabinet in Mar 20.
• The central bank is expected to further cut the policy rate by at least 25 basis points at its 25 Mar 20 meeting to help deal with the Covid-19 contagion following concerted emergency rate cuts by the Federal Reserve and other central banks.
• Siam Commercial Bank (SCB) predicts that the Monetary Policy Committee (MPC) will likely trim the benchmark rate by 0.25% or more. “Even though the rate cut will not have much impact in boosting new demand, the MPC could believe a rate cut will improve sentiment amid high volatility in the global financial market,” said a representative.
• Policymakers at the meeting are also likely to cut their economic growth forecast for the year 2020.
• With the policy space restriction, the MPC might also consider other measures, especially those to build up confidence and bolster liquidity, he said. Such measures include beefing up the THB to hover at an appropriate level and give forward guidance to communicate to the market that monetary policy easing will last until the outbreak’s impact recedes.
• “The MPC at this meeting will act ahead of the curve. Looking forward, uncertainties are high. The Covid-19 outbreak will likely escalate in the next 1-2 months,” said Mr Yunyong.
• The central bank has no plans to join in the global counterparts’ emergency interest rate call. “The MPC meeting schedule remains unchanged on [25 Mar 20],” a central bank official posted on the Line messaging app to reporters.

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