Economists: Thai interest rate cut to be maintained

ECONOMISTS are forecasting that Thailand’s Monetary Policy Committee (MPC) meeting onWednesday will maintain the country’s interest rate at 1.75 per cent despite the US Federal Reserve (Fed) cutting its interest rate last week.

“We believe that the MPC will maintain the country’s interest rate at 1.75 per cent as the Fed interest cut will have little impact on the country’s economy at this time,” Phatra Securities assistant managing director Pipat Luengnaruemitchai said.

He added the country’s economy in June showed only slight growth and the two per cent increase in the second quarter of this year’s growth will be one of the factors that the MPC will consider.

“I believe that the MPC will cut the interest rate but not at the next meeting on August 7 because they will want to watch the economy in July before making a decision. I think they will choose to maintain the interest rate for now,” Pipat said.

Meanwhile, the country’s economy in the second half of this year will face more risks from both domestic and overseas factors such as drought, which will directly impact domestic purchasing power, as well as low growth in the tourism sector.

The Sino-US trade war is a lso impacting exports and at best, t hese w i l l on l y s ee a sl ig ht grow th in the remainder of this year. All t hese factors will have a negative impact on the count r y’s economy for t he second half of t he year, he said.

“These factors will force the MPC to cut interest rate later on but not right away as it needs time to monitor and consider by how much to cut. It is also adopting a wait-and-see stance on how the government’s policy will boost the country’s economy in the rest of this year,” he said.

Siam Commercial Bank Economic Intelligence Center chief economist Kampol Adireksombat agreed, saying the MPC would have to cut interest rate to take account of low economic growth but this would probably be delayed until the September or October meeting.

“The MPC has to wait and see if the government’s policy to boost the country’s economy has sufficient impact,” he said.

CIMB (Thailand) research office head Amonthep Chawla predicted that the MPC will cut the interest rate in December if the economy in the third quarter remained slow and if the government’s measures did nothing to improve it.

However, Bank of Ayudhya chief economist and research division head Somprawin Manprasert does not think the MPC will cut the interest rate this year, as the country’s interest rate is still lower than that of other countries.

“Although the Fed cut its interest rate, I believe that the MPC will not cut interest rates this year after increasing it by 0.5 per cent early this year. The country’s economy is still showing average growth of three per cent but if it goes lower, that could lead the MPC to make a decision to make a cut,” he said.