• Policy rate retained at a record low of 0.50%, for the fourth straight meeting, in line with house and market expectations
  • A unanimous vote from its seven-member Monetary Policy Committee (MPC).
  • This marked the first MPC meeting under governor Sethaput Suthiwart-Narueput, who took office in October
• A cautious tone, emphasising on a “fragile” economic recovery and an “uncertain” path ahead
  • The Bank of Thailand (BoT) foresees a slow pace of recovery, with private consumption weighed by low income and the phase-out of stimulus measures.
  • Domestic political uncertainties were included into the list of growth headwinds, raising caution on the potential adverse impact on consumer confidence and investment decision. 
  • While a continued low policy rate was deemed necessary, the BoT reiterated for the second successive meeting, that fiscal policy is vital in reviving the economy and that the disbursement should be accelerated, via a more targeted mechanism.
• Less-negative inflation pencilled in for the remainder of 2020
  • ​​​​​​​Underscored by rising energy prices and the gradual improvement in global demand.
• THB’s rapid surge was again highlighted as unfavourable for the tourism and trade-reliant economy
  • The THB has hit its strongest level in over 10 months (USDTHB: 30.158) on Tuesday (Nov 17), lifted by the riskon sentiment following Biden’s victory in the US presidential election and positive vaccine headlines.
  • Measures (e.g. relaxation of capital controls) to stem the excessive rise in the THB are expected to be announced at a briefing scheduled on Friday.
• An unchanged policy rate is expected at the final MPC meeting of the year
  • ​​​​​​​Despite its slightly dovish tone, we expect the BoT to stand pat on policy rate in December amid recent extension of fiscal measures, gradual reopening of Thailand’s border and as it aims to “preserve the limited policy space in order to act at the appropriate and most effective timing”.
  • We expect future decisions to largely be contingent on the developments surrounding the global COVID-19 resurgence, the speed of the availability of vaccine and domestic political unrest.

Source: Kenanga Research - 19 Nov 2020