The Bank of Thailand's Monetary Policy Committee (MPC) is widely expected to maintain the benchmark interest rate at 2.75 per cent at tomorrow's meeting, the last of the year.
Moody's Analytics, the research arm of Moody's Investors Service, is in the camp that expects no change.
"Growth remains at two speeds as the domestic economy expands at a resilient pace, while the weakness in the global economy is dragging on export-facing industries," Moody's said. "Inflation pressures are still largely contained as global soft commodity prices remain subdued.
"The current trends are expected to persist over the near term, which should keep rates on hold. That said, the BOT has plenty of scope to lower rates further if the global economy deteriorates."
Bangkok Bank executive chairman Kosit Panpiemras acknowledged that tomorrow's decision would depend on the views of the MPC members. If they are concerned about capital inflows, the policy rate could be cut to discourage them.
He noted that the current rate is in line with economic fundamentals, appropriate for both borrowers and depositors.
Banluesak Pussarangsi, an executive vice president at CIMB Thai Bank, believes that the rate will be unchanged, given the latest cut and slight improvement in the US and Chinese economies. However, he foresees a few cuts next year, by an accumulated 50-75 basis points, as global uncertainties persist.
Despite the improvement in US economic sentiment, the "fiscal cliff" could drag the situation back down. The euro zone's problems are also not yet over, while it remains to be seen how sustainable China's recovery will be, Banluesak said.
Though export value recovered strongly in October, this has to be seen against the fact that in the same period last year several industrial zones were inundated by floods. The manufacturing sector has failed to improve as expected. , declining 13.7 per cent in the year to September after August's 11.2-per-cent decline. ??in what?? revenue?? Profit?? Export?? Output??
Electronics industries are still struggling because of weak global demand. The rising minimum wage and higher prices are causing rice producers to lose competitiveness to neighbours such as Vietnam. Thailand's tight links to the Japanese economy, where growth is slipping, are also proving problematic for producers.
The policy rate was cut by 25 basis points to 2.75 per cent at the October 17 meeting, the first cut since January.
Bangkok University Poll found in a survey conducted from November 6-13 that half of 73 economists from 35 organisations expected the policy rate to stay unchanged, while half expected a cut by another 25 basis points.
TMB Analytics said current economic conditions would allow the central bank to cut the policy rate. Despite falling exports, domestic demand remains strong. Still, there is a chance that the central bank will adopt a pre-emptive move, by cutting the rate before global uncertainties worsen exports and weaken Thailand's gross domestic product.
"Probability of a rate cut is raised from 10 per cent from 60 per cent. Certainly, the economy is performing well enough that a rate cut is unnecessary," it noted. "GDP in the third quarter expanded well and the general economic condition has not changed much from the previous month.
"At this meeting, economic indicators will not pressure the central bank to cut the rate, but there is a chance that bias towards other downside risks could be heightened."
TMB Analytics also noted that some MPC members might ponder risks from political instability after Saturday's anti-government demonstration. Banluesak of CIMB said the demonstration's economic impact was minimal, but could draw the attention of foreign investors.
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Article source: http://www.thethailandlinks.com/2012/11/27/analysts-expect-central-bank-to-keep-policy/
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