Thailand’s financial conditions tightened despite the recent MPC rate cuts.
In Q3 2019, Thailand’s financial conditions were tighter than historical average despite policy rate cut by the Monetary Policy Committee in August
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In Q3 2019, Thailand’s financial conditions were tighter than historical average despite policy rate cut by the Monetary Policy Committee (MPC) in August. It was due to persistent Thai baht appreciation, increase in corporate spread, and slowdown in corporate borrowing as well as commercial bank loan growth.
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When compared to the two policy rate cuts in 2015, which has similar economic slowdown as in recent year, the latest round of rate cuts (in August and November 2019) may not be able to deliver as much accommodation as in 2015 due to limited responses from other financial indicators.
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Going forward, with slow and precarious growth in 2020F together with tightened financial condition, EIC expects further monetary and fiscal policy easing. However, MPC may not be able to cut policy rate much further due to potential financial stability risk.
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EIC maintains our view on policy rate unchanged at 1.25% in December 2019 MPC meeting, but now sees rising probability of another rate cut by 1Q20 (40%).