Bank of Thailand Veerathai signals no imminent rate move

In his first media briefing as the Bank of Thailand (BOT) governor, Veerathai Santiprabhob indicated that the current policy stance remains accommodative. This is even if the BOT forecasts GDP growth at a mere 2.7% this year and that bulk of the impact from fiscal stimulus would only be seen next year. 

Veerathai stated the need to remain vigilant of risks in the financial system, given that borrowing cost has been low for a long period of time. It sounds almost certain that the BOT won't make any further rate move in the near-term. The current policy rate is just 25bps higher than the all-time low of 1.25% during the 2008-09 crisis. Yet, the stubbornly negative inflation is a concern. With negative inflation, there are fewer reasons why business owners should give their employers a raise this year. 

Nominal wage growth is practically zero this year, and this makes it hard for the authorities to boost GDP growth. Expect the BOT to continue prefer a softer baht, which would allow for more inflationary pressure. After the string of rate cuts and the relaxation of outward investments by residents, the baht is now the third worst performing Asian currency against the US dollar in the year-to-date.