KResearch expects Thailand's Monetary Policy Committee (MPC) to keep the policy rates unchanged at 1.75 percent during its fourth meeting of 2019. The MPC is likely to weigh risk factors to financial stability in its monetary policy. In particular, household debts further accelerated in the first quarter of 2019, speeding up for three consecutive quarters, while the quality of debt begins to show deteriorating signs. These are the factors prompting the MPC to take a cautionary approach in monetary policy implementation and closely monitor the developments of such risks, whereas easing monetary policy may exacerbate the economic fragility. KResearch views that the MPC will likely follow the results of macro and micro prudential measures such as the limits imposed on loan-to-value ratio and the tightening of credit underwriting standards, and determine whether these measures can effectively oversee the Thai economic health.
Looking ahead, the MPC will continue keeping a close watch on these developments and the movement of currencies, and chiefly weigh the long-term economic and financial stability in its monetary policy consideration. Although there are additional external risk factors to Thailand's economic growth which have led to the downward revision of Thailand's economic projections, the Thai economy is likely to expand at a level close to its potential. The government's economic stimulus measures may play a more effective role in driving the economic expansion. The main question for the monetary implementation is the issues related to risk factors that may increase the volatility of the monetary system. The MPC will closely follow how these factors will evolve together with the movement of currencies.