RBA Unlikely to Cut Interest Rates in 2026 as Inflation Pressures Persist, Says Westpac 
Fed Near Neutral Signals Caution Ahead, Shifting Focus to Fixed Income in 2026 
The Bank of Thailand is likely to keep its policy rate on hold today at 1.5 percent, noted Scotiabank in a research report. The central bank policymakers are worried regarding the macroeconomic and financial stability. The household debt of the country rose 4.73 percent year-on-year to THB 11.08 trillion at the end of the first quarter of this year.
During its meeting on June 22, the BoT’s Monetary Policy Committee viewed that “monetary policy should remain accommodative, and stands ready to utilize an appropriate mix of available policy tools in order to ensure that monetary conditions are conducive to the economic recovery, while ensuring financial stability”. Also, the Committee saw merit in keeping policy space, stated the meeting minutes.
The central bank had recently mentioned that the second quarter economic growth is likely to exceed the first quarter’s 3.2 percent growth with the help of increasing tourist arrivals and fiscal spending. The BoT maintained its full year 2016 growth forecast at 3.1 percent during its June meeting.
Also, the central bank Senior Director of the Monetary Policy Group Roong Malikamas mentioned in July that the CPI inflation of Thailand is expected to come within the projection range of 2.5 percent, plus or minus 1.5 percent in the second half of 2016.
On the currency pair front, USD/THB will continue to be primarily driven by external factors such as the fallout from the Brexit vote, US Fed’s tightening path and China’s decelerating economy, according to Scotiabank. The Thai baht is likely to trade along with regional peers, gaining from steadier market sentiment, reflationary policies and accommodative external liquidity.
The Thai baht has gained around 3.8 percent year-to-date as global funds have bought a net USD 2.33 billion of local shares and USD 9.95 billion of bonds. Meanwhile, given the persisting domestic uncertainty, hovering external turmoil and diverging monetary policies, the medium-term outlook of the THB is bearish.
“We expect USD/THB to reach 35.5 at the end of this year as the pair is likely to trade higher when approaching December FOMC meeting,” added Scotiabank.
Moreover, the prospect of capital outflows might also weaken the THB in the medium-term. The Bank of Thailand had stated in July that domestic investors would be permitted to directly invest in overseas securities beginning from July 20 as part of a plan announced in 2015 to urge capital outflows.
