BoT likely to adopt 25 bps hike in Q4’19, bias seen hawkish on concerns over financial stability risks: ANZ Research

The Bank of Thailand (BoT) is expected to adopt a 25 basis points hike in its benchmark interest rate by the fourth quarter of this year; however, the central bank’s bias will remain hawkish given persistent concerns about financial stability risks, according to the latest report from ANZ Research.

Notably, two out of six members (one other member was absent) voted for a rate hike at its last meeting in February. Household debt growth has picked up since Q3 2017 and is now outpacing nominal GDP growth at a time when household leverage is already very high.

The BoT is also concerned about search-for-yield behaviour amid an environment of low rates, particularly in saving cooperatives.

The upshot is that export sector weakness is likely to drag down overall GDP growth in H1 to the low 3 percent-range. Coupled with weak inflation, a rate hike by the central bank of Thailand now looks unlikely in the near term, the report added.

"Overall, we are now revising our full-year 2019 growth forecast from 4.0 percent to 3.8 percent to reflect a disappointing H1 and pushing back our expectations for a 25bp rate hike by the BoT from Q2 2019 to Q4 2019," ANZ commented.