BOT cuts 25bp to shore up confidence

The Bank of Thailand cut its policy rate today by 25bp, taking the rate to a four-and-a half-year low of 1.75%. This was against the expectation and consensus for an on-hold decision, although the decision to cut was a finely balanced one, with the vote at 4-3 in favour of the cut, and the three dissenters voting to keep policy on hold.
 
Thailand's MPC point to a weaker-than-expected recovery in domestic demand, and higher downside risks to exports stemming from China's slowdown as the principal reasons for the cut citing a need to shore up private sector confidence. 

This suggests the BoT will lower its 2015 growth forecast from 4.0% when it releases new projections on 20 March. There was less concern shown on inflation, with the BoT continuing to attribute the decline to lower oil prices. 

Barclays Notes as follows on Wednesday:

• We continue to expect policy to remain accommodative for a considerable period, and now no longer expect the BoT to hike in Q4, but to keep the policy rate unchanged for the remainder of 2015. 
  
  
• We think the move today reduces the risk of an additional cut from here, though we would not rule this out if we see renewed signs of weakness in growth or if core inflation were to see a more substantial decline. 
  
  
• However, while the pace of recovery in the domestic economy has been sluggish, tourism has been a strong support, and as a manufacturing-oriented net oil importer, Thailand is well-placed to benefit from the oil price decline.