Thai Baht: BoT caution keeps policy on hold – Commerzbank

Commerzbank notes that the Bank of Thailand (BoT) kept its policy rate at 1.0% and signalled a cautious stance, prioritizing growth risks over inflation. USD/THB has risen for five consecutive sessions, up 0.9% to 33.43. Officials attribute Thai Baht (THB) weakness mainly to broad US Dollar (USD) strength and equity outflows, while stressing readiness to smooth excessive FX volatility if needed.

Baht under pressure as BoT watches

"Bank of Thailand (BoT) unanimously voted to keep the policy rate unchanged at 1.0% for the second consecutive meeting, matching market expectations. The Committee assessed that the current policy stance remains accommodative to support the economic recovery. It noted that while growth has been stronger than expected, it remained low and uneven."

"BoT views the recent rise in inflation as transitory and supply-driven, and expects price pressures to ease once supply-side disruptions subside. Nonetheless, Assistant Governor Don Nakornthab stated that if inflationary pressures spread beyond supply-side factors, BoT will move to tighten policy."

"Looking ahead, BoT is likely to keep the policy rate unchanged for the rest of the year as its primary concern centers on downside risks to growth. Inflation, which is viewed as transitory, is a less pressing issue for now."

"In FX, USD/THB rose 0.9% to 33.43 yesterday, and has risen for the fifth consecutive session. Assistant Governor Nakornthab said that THB weakness was primarily due to USD strength and one-off equity outflows. Nonetheless, he said that BoT is ready to intervene to smooth excessive volatility if one-sided moves intensify."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)