Global Markets Division, Krungsri Bank Public Company Limited commented on the results of the Monetary Policy Committee (MPC) meeting, which surprised the market by voting to lower the policy interest rate by 0.25% to 1.50%. This marks the first interest rate cut since May 2015, leading to a rapid depreciation of the baht, reaching 30.90 per dollar before stabilizing around 30.80, slightly weaker than previous trading levels. Since the beginning of the year, the baht has appreciated over 5% and is the strongest currency compared to others in Asia. The MPC will closely monitor the exchange rate and capital flows, as well as assess the need for additional appropriate measures. 

 

          The MPC stated that the Thai economy is expected to grow below previous forecasts, noting that the slowdown in exports is beginning to affect domestic demand. The MPC assessed that economic growth may fall below potential levels, while the current external environment is not conducive to exports, tourism, private consumption, private investment, and government spending. Regarding price pressures, the MPC views that general inflation is likely to remain below the lower bound of the target range of 1-4%. Additionally, the appreciation of the baht significantly increases risks amid escalating trade conflicts.

          The MPC's next meeting is scheduled for September 25, 2019. Today's vote can be interpreted as indicating that the economic outlook is worse than previously assessed. The MPC emphasized the impact of maintaining low interest rates for too long and highlighted that measures have been implemented to manage financial stability risks to some extent. Two committee members expressed the opinion to maintain interest rates. However, despite the current global trend towards monetary easing, there is uncertainty about whether the decision to cut the policy rate will stimulate the economy in the current situation where interest rates are already low. Looking ahead, we expect the policy interest rate to remain at 1.50% for the rest of this year, with global trade war issues being a risk factor that could affect our outlook.

 

Thank you for the information from the Global Markets Division, Krungsri Bank Public Company Limited