BoT as expected left the benchmark interest rates unchanged at 1.50%, a decision that fell in line with ours and market consensus, although there was some pressure to raise the lending rate after reporting a 4.6%y/y 2Q2018 GDP growth. Meanwhile, the central bank lowered its 2019 headline and core CPI to 1.1% and 0.8% from 1.2% and 0.9% previously.

The decision by BoT to lower 2019’s inflation forecast will not delay their process to start normalising the policy rate since inflation is still within their target range of 1-4%. Room for them to institute the first rate hike in 4Q2018 by 25 basis points (bps) is on our cards, with a 40% probability, while placing a 60% chance for a rate hike in 1Q2019. Although trade growth continues to show momentum, inflation remains moderate and hence we need to evaluate the potential incoming data to ascertain inflation is getting hotter.

• Bank of Thailand (BoT) as expected left the benchmark interest rates unchanged at 1.50%, a decision that fell in line with ours and market consensus, although there was some pressure to raise the lending rate after reporting a 4.6%y/y 2Q2018 GDP growth.

• Meanwhile, the central bank lowered its 2019 headline and core CPI to 1.1% and 0.8% from 1.2% and 0.9% previously. For 2018, the previous estimates of 1.1% and 0.7% were retained. GDP growth forecasts were also left unchanged at 4.4% and 4.2% for 2018 and 2019, respectively.

• We believe the decision by the central bank to lower 2019’s inflation forecast will not delay their process to start normalising the policy rate. Inflation is still within the BoT’s target range of 1-4%. However, room for BoT to institute its first rate hike in 4Q2018 by 25 basis points (bps) is on our cards, though we still believe the rate hike will more likely happen in early 2019.

• We have placed a 40% probability for a rate hike in 4Q2018 and 60% chance for a rate hike in 1Q2019. While trade growth continues to show momentum, inflation remains moderate. Currently, headline CPI is 1.6% as of August, which is at the lower bound of the official 1% - 4% target range. We foresee inflation to stay at the "lower bound" in 2018 and we need to evaluate the potential incoming data to ascertain inflation is getting hotter.

Source: AmInvest Research - 20 Sept 2018