K-Research expects central bank to stay the course on rates

K-Research expects central bank to stay the course on rates

Photo: Bank of Thailand
Photo: Bank of Thailand

Despite growing market anticipation of monetary policy easing, Kasikorn Research Center (K-Research) is ruling out the possibility of a Bank of Thailand (BoT) policy rate cut at its April 10 meeting amid growing concerns about a weakening baht.

Kanjana Chockpisansin, head of the research, banking and financial sector at the think tank, said K-Research is maintaining the view of its parent Kasikornbank that the central bank's Monetary Policy Committee (MPC) will keep rates unchanged at its meeting next week as "economic conditions haven't changed much from its previous gathering".

The MPC kept the policy rate at a 10-year high of 2.5% for two previous meetings.

As the country's economic outlook dims, partly because of delays to the 10,000-baht digital wallet scheme, some analysts mused on the possibility of a rate cut next week.

On Monday, the World Bank downgraded its Thai GDP growth forecast this year to 2.8% from 3.2%, citing a global trade slowdown and delays in fiscal budget disbursement.

"Comments from Bank of Thailand officials show they want more time to evaluate economic conditions and monitor the timing of an economic recovery once the rate is cut," Ms Kanjana told the Bangkok Post.

Officials have repeatedly stated the slowdown is mainly caused by the country's structural problems and economic cycles, while support from a rate cut "is unlikely to be significant", she said.

In addition, cutting Thai interest rates before the Federal Reserve, which the market expects will occur in June at the earliest, could fuel fund outflows and pressure the baht to slide further, said Ms Kanjana.

This year, the Thai currency has depreciated by 7%, quoted at near a six-month low of 36.69 baht to the dollar on Wednesday.

The Kuala Lumpur-based Maybank predicted the Bank of Thailand would cut the policy rate once this year and again in 2025, helping to pump up the Thai stock exchange.

"We think a domestic rate cut will provide a tailwind for the Stock Exchange of Thailand [SET] index's performance, in addition to up to three potential Fed rate cuts this year," the research department of Maybank said in a report.

During the previous five rate-cut cycles since 2001, the SET index returned an average of 7% one month after the first rate cut by the Thai central bank.

Comparable figures for three and six months after the first rate cut show even greater returns of 11% and 23%, respectively.

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