A day heavy with ASEAN-6 central bank meetings held some surprises. The Bank of Thailand (BOT) unexpectedly cut its benchmark policy interest rate for the first time in four years by 25bps to 2.25% on Wednesday. The reduction, which was voted by five out of seven of the Monetary Policy Committee (MPC) members, was an abrupt shift from the unanimous hold in August. The MPC sees the policy rate cut as a slight calibration to neutral, to alleviate borrowers’ debt-servicing burden. In our view the BOT is in no hurry to follow up with another immediate rate cut. The policy rate is likely to be on hold at 2.25% in 2025, amid higher economic growth and inflation that is within target. The MPC Secretary Sakkapop Panyanukul signalled that the BOT’s cut should not be seen as the start of an easing cycle. The statement also noted that the policy rate ‘should not be at too low a level that would create build-ups of financial imbalances in the long term’, suggesting a continued focus on household debt deleveraging, while balancing with economic growth and price stability. The BOT sees the recalibrated neutral policy stance as remaining appropriate with its economic growth and inflation outlook. While we lower our headline inflation forecasts to 0.5% in 2024 and 1.5% in 2025, these are in line with the BOT’s projections to return to its 1-3% target by end-2024, amid faster price increases in raw food and energy items, and a gradual rise in core inflation.
After delivering a rate cut in September, Bank Indonesia (BI) drew a pause on Wednesday, leaving the benchmark rate at 6.0%. Recent IDR volatility and the central bank’s stepped-up intervention defence to contain the rupiah’s one-sided weakness, had lowered the scope for a back-to-back rate cut. This also marked a vote for financial market stability just as the new government is set to take office by early next week (see our report - Indonesia: Rate pause, new government).
The Bangko Sentral ng Pilipinas (BSP) lowered the benchmark rate by 25bp to 6.0%, based on its assessment of a favourable disinflationary path despite the recent bout of peso volatility. Having raised rates by the most in the region, the BSP has been pre-emptive in loosening monetary conditions, with the RRR cut last month to complement the easing bias. Notably, the BSP sees the balance of risks to the 2025 and 2026 inflation outlook shifting up due to utility rate adjustments and higher minimum wages in areas outside Metro Manila, despite a cut in rice import tariffs. We see room for a 25bp cut each by the BI and BSP in 4Q24.
In all, while the ASEAN-6 central banks have a dovish tendency, they are not on a pre-determined rate cut path. The quantum and timing are likely to be dictated by financial market volatility, domestic growth-inflation mix and US Fed’s moves.
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