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Thailand: K-Research: MPC unlikely to cut rate
Financial analysts predict that the Monetary Policy Committee (MPC) will maintain the policy rate at 0.50% at Wednesday’s meeting and discuss other tools for solving the business and household liquidity problem.
Kasikorn Research Center (K-Research) said cutting the policy rate to near zero is unnecessary at the moment, as a lower interest rate may not appreciably help businesses and households access liquidity.
“We expect that the MPC will maintain the policy rate at 0.50% until the end of this year if Thailand’s economy has not significantly changed,” K-Research said in a release. “And this will follow other global central banks, especially the US Federal Reserve, which previously sent the signal that it will maintain its policy rate at close to zero at least until 2023.”
The Bank of Thailand recently launched several measures to support corporations, such as allowing debt restructuring through consolidation. Officials will likely continue to launch new measures to solve the liquidity problem and reduce non-performing loans.
K-Research said the central bank will continue its negative outlook and slightly revise down Thailand’s economic growth for the rest of 2020 because both the number of inbound tourists and the amount of government relief spending are lower than expected.
Even so, the Bank of Thailand will consider launching new economic stimulus packages and leave open the possibility of another interest rate cut if the situation worsens.
Wilasinee Boonmasungsong, vice-president for research at Globlex Securities, said she expects the MPC to maintain the policy rate at 0.50%, as it is already at a historic low and the policy rate is important for the debenture benchmark in the bond market.
She said the central bank will have to come up with new policies to boost economic growth instead of relying on rate cuts.
“Even if it further cuts the interest rate, this will not help banks’ loan growth, due to [bad debt] for households and unemployment still on the rise,” Ms Wilasinee said. “The Bank of Thailand will likely focus on supporting liquidity for those corporations and SMEs, and the government will continue to inject liquidity to help the economy.”
Somchai Amornthum, executive vice-president in the research department at Krungthai Asset Management (KTAM), said the MPC will likely maintain the policy rate as the Finance Ministry uses more fiscal policies to solve economic problems.
He said an interest rate cut will not help many people at the moment, as the problem remains a lack of liquidity.
Mr Somchai predicts that the central bank will announce positive news relating to GDP growth and upgrade its full-year forecast from -8.1% to -7% because the economy is recovering faster than expected.
But the number of tourists this year is lower than anticipated, at 6-7 million people, which will lead economic growth next year to be lower than expected. The central bank may revise down its 5% growth prediction for 2021.
KTAM anticipates that in 2021 the economy will grow by about 3% because of a poor recovery hampered by the Covid-19 pandemic.
Source: https://www.bangkokpost.com/business/1990019/k-research-mpc-unlikely-to-cut-rate