BoT cut rates to record low – UOB

M.Udomkerdmongkol, Economist at UOB Group, assessed the recent decision by the Bank of Thailand (BoT) to reduce the key rate by 25 bps to a record low of 1.25%.

Key Quotes

“In an attempt to boost a slowing economy, the BoT cut the policy rate by 25bps to a record low of 1.25% with MPC members voting 5-2 in favour”.

“Due to growth headwinds, the Thai economy is expected to expand below potential at 2.8% this year”.

“For 2019, headline inflation is expected to average at 0.8% below the official target zone”.

“For the next policy meeting on 18 December 2019, the BoT will likely maintain the policy rate at 1.25% to gauge the transmission mechanism of monetary policy and the easing of rules on capital outflows first before considering the next move. Additionally, the real policy rate remains at a low level compared with those of other ASEAN countries. Although Thailand’s economy would grow more slowly than its potential this year, there are other risks to financial stability that warrant close monitoring. In particular, household debt picked up to 78.7% of GDP at the end of 1Q19, which is among the top three countries with the highest household debt in Asia”.