Bank of Thailand

Despite a preference from the MoF for a rate cut, the BoT unanimously kept policy on hold,suggesting that the MPC does not share the same concerns about growth and inflation. On 25September, the Fiscal Policy Office of the MoF urged BoT to slash the benchmark borrowing rateby 50 basis points to boost economic growth and curb speculative inflows (Bloomberg, 25September). This came two weeks after Finance Minister Apisak Tantivorawong called on thecentral bank to ease policy in order to boost investment, resulting in strong statement from BoTGovernor Veerathai Santiprabhob, who noted that he saw no need for easing at this juncture(Bangkok Post, 11 September).

    We agree with BoT’s assessment that growth numbers will look a bit rosier in the quarters ahead(see Bank of Thailand Watch: Staying the course, but not complacent). But our optimism is a bitmore tempered. Subdued private consumption, partly a result of the household debt overhang andstagnating wage growth, is contributing to the lack of inflationary pressures in the economy. But,for the time being, the stronger growth outlook should easily keep the BoT on hold, barring a sharpdeterioration in inflation in the months ahead.