MPC Meeting on September 23, 2020: To focus on boosting liquidity for businesses and households, while likely to keep policy rate steady at 0.50% until the end of this year

KResearch expects that the Monetary Policy Committee (MPC) will keep its policy rate steady at 0.50% at least until the end of this year during its meeting slated for September 23, 2020 to maintain the monetary policy space. The MPC may view that a policy rate cut to near zero is not necessary at this time in line with monetary policy stances of other central banks, such as the US Federal Reserves (Fed), which recently signaled to keep the Fed Funds rate near zero until at least 2023.

An urgent measure geared towards boosting liquidity for businesses and households may now be formed, because it can directly address economic problems better than a policy rate cut. The Bank of Thailand (BOT) has introduced debt restructuring measures for borrowers in phases as the debt moratorium measure will come to an end in this October, such as debt consolidation. Looking ahead, the BOT may issue additional measures to continue helping various types of borrowers survive the COVID-19 crisis, which would in turn help alleviate NPL-related problems.

An issue that still needs to be monitored is the revision of economic growth forecasting. It is expected that the perception of the BOT on Thai economy will not change significantly, while GDP growth forecast will be revised downward slightly due to the lower-than-expected growth in the number of international tourist arrivals in Thailand, and the fact that budgetary disbursements have been behind schedule. Nevertheless, the Thai economy continues to experience increased downside risks, prompting the MPC to assess the situation and weigh the risks in various aspects. If the situation gets much worse than prior estimates, the MPC may resort to new economic stimulus measures and additional policy rate cuts or even unconventional monetary measures.

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