BOT monetary policy to stay accommodative for the rest of 2015

Thailand Inflation fell further in March, and was slightly below our and market forecasts. While the drag from lower oil prices is easing, core inflation remains benign. Core inflation also fell modestly to 1.31%, which is a 12-month low, and slightly weaker than our and consensus expectations (1.4%). Food inflation also continues to soften despite poor weather conditions.

"Despite today's downside surprise, we remain comfortable with our 0.2% inflation forecast for 2015 and expect inflation to remain in negative territory for much of H1. We note that the recent stabilization in global oil prices has begun passing through the Thai economy, but falling core prices and low food prices are keeping a lid on headline inflation", says Barclays.

The 25bp rate cut in March by the BoT will be likely a one-off, aimed at pre-empting a further decline in confidence, and that this reduces the risk of further near-term moves - particularly given the degree of division among MPC members. 

"Given the slow pace of recovery in the domestic economy, as well as benign inflation, we expect monetary policy to stay accommodative for the rest of 2015, and we no longer forecast a rate hike in Q4 15", added Barclays.