MPC Likely Keep Policy Rate Steady at September 25, 2019 Meeting While Its Monetary Policy Stance Hinges Mainly on Thai Economic Developments (Business Brief No.3819)

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       We at KResearch expect that the Bank of Thailand (BOT)'s Monetary Policy Committee (MPC) will likely maintain its policy rate at 1.50 percent during the sixth meeting of 2019 slated for September 25, 2019. The fact that 3Q19 economic indicators did not deteriorate from those seen in 2Q19 may give the MPC to assess the results of its policy rate cut at the previous meeting and the government economic stimuli for some time while pressure from the policy rate cuts by the Federal Reserve (Fed) and European Central Bank (ECB) on the BOT's monetary policy stance may be limited. In addition, the BOT may have adequate tools to supervise the Baht, thus its decision towards the monetary policy direction will depend more on domestic factors rather than external factors.

            Looking ahead, KResearch views that the MPC may thoroughly assess the Thai economic outlook by considering both positive and negative factors. However, close attention must be paid to the BOT's view towards the Thai economic developments, going forward. If the BOT's GDP growth projections for 2019 and 2020 are below the potential level of growth at 3.5 percent, it is likely that the MPC will consider trimming its policy rate later on, though it may attach importance to the stability of financial system and effectiveness of monetary policy transmission. Other factors that the MPC may consider include a new round of the US-China trade talk scheduled for October 2019, Brexit negotiations between the UK and EU, plus developments in the Middle East. If risks to the Thai economy increase significantly during the remainder of 2019, it is likely that the MPC will revise its monetary stance.

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