Thailand: Battle to curb strong baht increases rate-cut chances

• Nov 06, 2019

Thailand’s battle to keep its surging currency at bay is increasing the odds of a second interest-rate cut this year.

The Bank of Thailand’s Monetary Policy Committee is set to reduce its benchmark policy rate on Wednesday by 25 basis points to 1.25%, matching a record low, according to 16 of 26 economists in a Bloomberg survey. The rest expect the rate to stay at 1.5%.

In the spotlight is the baht’s 9.2% climb against the dollar in the past year — the strongest in emerging markets, and in defiance of periodic foreign exchange intervention by the BoT, an August interest-rate cut and efforts to stem short-term inflows.

“The urgency seems to be more now,” said Radhika Rao, an economist at DBS Group Holdings Ltd. in Singapore, who changed her view for the rate cut timing to Wednesday from December. She sees such a policy easing as “tantamount to the central bank’s signalling its discomfort with a strong baht.”

Still, Rao says, a cut “might lower the baht’s yield appeal, but it will be no panacea.”

Sluggish growth and inflation also have tipped the scales for some analysts now eyeing a rate cut at Wednesday’s meeting.

“With growth significantly disappointing the BooT’s latest forecasts, and inflation further undershooting its target, we now expect the BoT to deliver a 25 basis-point policy rate cut” this week versus an earlier forecast of December, Charnon Boonnuch and Euben Paracuelles, economists at Nomura Singapore, wrote in a Nov 1 research note.

Source: https://www.bangkokpost.com/business/1788434/battle-to-curb-strong-baht-increases-rate-cut-chances