Bank of Thailand faces tough decision
BANGKOK: The Bank of Thailand will face a tough policy decision, while South Kore will release its fourth-quarter growth report and Japan offers up an inflation reading in a holiday shortened week. On Wednesday the BoT will weigh in on monetary policy, faced with choosing between cutting interest rates to bolster a flagging economy or keeping them on hold amid rising concerns about debt levels.
Moody's Analytics expects the BOT to stand pat with its current 1.5 percent benchmark rate. "The Thai economy is off to a poor start in 2016. Weak external demand continues to be a drag on exports. This is hitting export-oriented manufacturers, leading to declining industrial production. The domestic economy is not faring much better," it said in a note Friday. "While these conditions would suggest an easing of monetary policy, we think this is unlikely. There are rising concerns about private debt levels, which would only be exacerbated by lower interest rates."
"Price pressures are dissipating across Japan as oil prices continue to fall while growth remains elusive," it said. The Bank of Japan (BOJ) has struggled to boost the economy out of deflation and toward a 2 percent inflation target, turning on January 29 to a negative interest rate policy to encourage banks to lend more. The minutes of the BOJ meeting in January, released last week, showed that some members of the monetary policy committee were concerned the inflation target wouldn't be reached within the forecast period of early 2017.