Thailand screws policy rate cut

Cuts are not expected this year as Bank of Thailand's monetary policy committee left its rate unchanged at 3%.

According to HSBC, Bank of Thailand's (BOT's) closely watched policy meeting today concluded with no change to the 3% policy rate. Attention is now on the Sep 5 meeting. Odds of an easing then appear to have risen, with the BOT having trimmed its growth projections and 2 out of 7 committee members voting in favour of a 25bp cut. But we do not see a September cut as a given, and continue to expect no policy change for the rest of the year. BOT's growth projections are still quite optimistic, and it continues to view the current policy rate as "accommodative."

Here's more from HSBC:

Its policy statement remained dovish. Although risks to the global economy were seen as having "increased further" owing to developments in the US and the Eurozone, the central bank continued to sound upbeat on domestic growth. In fact the central bank noted twice in its statement that Thailand's economic growth was "close to potential."

Going forward the central bank felt that "accommodative monetary conditions, strong credit growth, good employment opportunities and government stimulus measures... should continue to sustain private consumption and investment expenditures going forward."

In the concluding paragraph of the statement, the MPC deemed that "the overall macroeconomic policy mix was appropriate." The majority of members also viewed "the current monetary monetary policy stance to be accommodative enough to support domestic economic growth going forward and to cushion, to some degree, against global economic risks."

Finally, as any prudent central bank would in the current environment, the BOT reiterated that it "would closely monitor developments in the global economy... and stood ready to take appropriate action as warranted."