MPC cut the policy rate by 25 bps at its special meeting
The MPC voted unanimously at its special meeting to cut the policy rate to 0.75% as the impact of the COVID-19 outbreak would be more severe
Author: : Yunyong Thaicharoen, Ph.D, Kampon Adireksombat,Ph.D. ,Wachirawat Banchuen, Pongsakorn Srisakawkul
The MPC voted unanimously at its special meeting to cut the policy rate to 0.75% as the impact of the COVID-19 outbreak would be more severe and prolonged than previously expected and in order to reduce interest burdens of borrowers affected by the COVID-19 outbreak and alleviate liquidity strain in the financial markets.
EIC expects another 25 bps rate cut by the MPC at the meeting on 25 March 2020 or at the latest by the end of the second quarter of this year. This is due to 1) the Thai economy would likely experience a larger contraction than previously expected, and 2) although measures to support liquidity and stability of the bond market were already in place, the MPC might have to cut the policy rate further to ensure sufficient liquidity, support debt restructuring, and build confidence among market participants, especially amid highly volatile global financial markets.
In the period ahead, the MPC may introduce additional measures, such as a more intensive use of forward guidance to signal a low-for-long interest rate until the economy clearly recovers, and targeted soft loans.
Eyes on risks in Thailand’s corporate bond market, liquidity condition in the financial markets, and dollar funding.