Kiatnakin Phatra Securities (KKPS) noted that while market expectations remain tilted towards a rate cut by Thailand’s Monetary Policy Committee (MPC) in December, patience may be required before the central bank pivots.
Investors have largely priced in a dovish stance, driven by persistently low inflation, slow economic recovery, and beliefs that the incoming Bank of Thailand (BOT) governor will be more accommodative. However, September’s unexpected 5-2 vote to maintain rates signaled that the MPC is not in a rush to ease further unless economic and financial conditions deteriorate.
The MPC recognizes ongoing challenges in the Thai economy, citing uneven consumption, weak exports, and sluggish private investment. KKPS warns that third-quarter GDP growth may underperform both market and BOT forecasts. Despite these concerns, the committee views the current situation as a temporary soft patch rather than a crisis, with recovery anticipated in the fourth quarter.
Policy flexibility remains a key consideration for the MPC, which prefers to preserve its ability to respond to future shocks. With the policy rate already at an accommodative level—highlighted by a relatively low real rate—the committee may see limited benefit in cutting rates now compared to the value of retaining future policy tools.
KKPS stated that the incoming governor, despite being seen as more dovish, will not drastically alter the committee’s consensus-driven, data-dependent approach. Unless incoming economic data show a significant downside, further easing may be deferred.
Instead of broad rate cuts, the BOT is shifting its focus toward targeted measures to address high household debt and stimulate lending, such as credit guarantees and soft loan programs. A new Asset Management Company (AMC) initiative aims to help restructure non-performing consumer debt, impacting around three million accounts, with support capped at THB 100,000 per borrower.
While KKPS still expects eventual rate cuts, possibly down to a terminal rate of 1.0%, the likelihood of a December move has diminished. The next cut is now seen as more likely in the first quarter of 2026, barring substantial negative surprises in data. Future MPC decisions will remain guided by the latest economic readings, with action possible if growth or financial conditions worsen significantly.
