The Bank of Thailand released the minutes of the 11 March MPC meeting this morning.
The most notable take was the reference to recent THB strength, which the MPC attributed to "fundamental flows", such as the recent widening in the current account surplus and FDI; it judged portfolio inflows to be "quite balanced overall".
Barclays notes..
- The MPC stated that while it would monitor capital flows closely, flows to Asia following the ECB's QE announcement would likely be limited, given that European investors generally prefer developed market assets.
- Despite concerns expressed by business groups over THB strength, as well as Deputy PM Pridiyathorn's comments that the March rate cut would make exports more competitive, the THB REER has barely moved since the 11 March policy meeting.
- This suggests the impact of further cuts on the currency would be limited.
- No reference in the minutes was made to THB strength as the driver behind the MPC's decision to cut 25bp at the meeting, which itself was a close decision (three of seven MPC members opposed the cut).
- The reasoning for the cut was focused on the need to shore up private sector confidence, which had weakened against the backdrop of slow fiscal spending.
