Analysts predict BoT to maintain policy rate despite weak baht

There’s a growing consensus among financial analysts that the Bank of Thailand (BoT) won’t lower its policy rate during its April 10 meeting, despite a weakening baht and economic outlook. This perspective is strongly held by Kasikorn Research Centre (K-Research), according to Kanjana Chockpisansin, the head of research.

Kanjana stated that they believe the BoT’s Monetary Policy Committee (MPC) will keep the rates steady as there haven’t been substantial changes in economic conditions. The MPC previously maintained the policy rate at a 10-year high of 2.5%.

Contributing to the country’s economic uncertainty is the delay in the 10,000-baht digital wallet scheme, which led to speculation about a possible rate cut. The World Bank has also revised its Thai GDP growth forecast for this year down from 3.2% to 2.8%, noting a global trade slowdown and fiscal budget disbursement delays.

Kanjana relayed the BoT officials’ views, stating that they are seeking more time to assess economic conditions and gauge the timing of an economic recovery once the rate is cut. The officials maintain that the economic downturn is primarily due to the country’s structural issues and economic cycles, rather than a lack of rate cuts.

There are fears that if Thai interest rates are cut before the Federal Reserve’s expected move in June, it could trigger fund outflows and put further pressure on the already depreciating baht. This year, the Thai currency has depreciated by 7%, standing at a near six-month low of 36.69 baht to the dollar.

Nonetheless, Maybank, based in Kuala Lumpur, predicts that the BoT will cut the policy rate once this year and again in 2025. This move would potentially boost the Thai stock exchange. Maybank’s research department stated that a domestic rate cut would likely benefit the Stock Exchange of Thailand’s performance, alongside up to three potential Fed rate cuts this year.

Historical data shows that since 2001, the SET index has returned an average of 7% one month after the first rate cut by the Thai central bank. The returns have been even higher three and six months after the first rate cut, standing at 11% and 23% respectively, reported Bangkok Post.