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THURSDAY, December 08, 2022
BOT likely to keep rate at 1.5% for rest of year

BOT likely to keep rate at 1.5% for rest of year

TUESDAY, March 28, 2017

PHATRA Securities expects the Bank of Thailand’s rate-setting committee to keep its benchmark rate at 1.5 per cent when it meets today, and likely hold that mark for the rest of the year.

Pipat Luengnaruemitchai, assistant managing director at Phatra Securities, said the current policy rate remains an accommodative fit for the needs of Thai economic growth and the country has a large surplus in its current account. There are no signs of concern for inflation, Pipat added.
However, if the economic recovery firmed up later this year and the US Federal Reserve raised its benchmark rate two or three times this year, as expected, the BOT’s Monetary Policy Committee (MPC) would be likely to follow suit, Pipat said.
He said that, assuming the MPC held fire on any rate rise, capital could flee the country. Any decision by the MPC to raise rates would hinge on a number of factors, particularly Thailand’s economic fundamentals, Pipat said.
For the baht, Pipat said the currency may strengthen to 34 to the US dollar in the short term, arising from likely foreign capital inflows into stocks and short-term bonds in emerging markets.
Such a scenario may result from any disappointment in the market for the prospects of US President Donald Trump’s economic policies.
Since early this year, foreign investors have been net sellers of Thai stocks worth about Bt9 billion. In 2016, foreign investors made net |sales of Bt78 billion – a portion of the funds that investors had parked in emerging markets for their high returns.
Pipat expressed no concerns over capital movements for now, noting that the central bank has been |monitoring the appreciating baht |and has made sporadic interventions.
With the capital inflows the baht has appreciated swiftly, outpacing the gains by its regional peers. However, that is positive for investment and consumption, given the lower costs of imports, Pipat said.
He said that as Thai exporters had made adjustments over the past two or three years, they have been cushioned from the effects of this round of rapid baht appreciation.