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BUZZ-COMMENT-With little room for manoeuvre, BOT to hold rates

The Bank of Thailand is likely to leave its key rate unchanged for a second straight month at a record low of 0.5% at Wednesday's monetary policy meeting.

The Bank of Thailand is likely to leave its key rate unchanged for a second straight month at a record low of 0.5% at Wednesday's monetary policy meeting.

After five rate cuts totalling 125 basis points since August, including three this year, the central bank is looking to buy some time to monitor the effects of previous rate cuts and government fiscal stimulus . Sixteen of 18 economists in a Reuters poll expect the key rate to be kept steady

BOT on Friday sounded optimistic of a pickup in economic activity in June following the easing of a lockdown to curb the spread of the coronavirus. The central bank forecast Thailand's Q2 GDP to have shrunk by 12%-13% from a year earlier. But it held out the prospect that the GDP, which is due on Aug. 17, might be better than the BOT's estimates .

The minutes of the June 24 meeting showed that some members felt policy space should be preserved for the worst . And with just one more scheduled rate meeting after Wednesday before new governor Sethaput Suthiwart-Narueput takes office in October , it is logical that a bit of policy headroom be afforded to the incoming governor.

The relative weakness of the Thai baht in July also provides another reason for the BOT to stay on hold

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THB: https://tmsnrt.rs/33mrF6v

(Krishna Kumar is a Reuters market analyst. The views expressed are his own)

((krishna.k@thomsonreuters.com))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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