THAILAND: VIEW: HSBC Believes Growth & FX To Keep BoT On Hold
November Thai CPI remained below the Bank of Thailand’s (BoT) 1-3% target band with headline picking up less than expected to 0.95% y/y due to increased food supply and core remaining at 0.8% y/y. HSBC believes that fiscal stimulus will support demand, which should drive higher underlying inflation. It expects BoT to be on hold at its December 18 meeting despite subdued inflation given “growth and FX”.
- Lower-than-expected headline inflation “poses a downside risk of the BoT cutting its policy rate by 25bp during the December 2024 rate-setting meeting,” according to HSBC.
- “We continue to expect the BoT to keep its policy rate steady at 2.25% in December. Other economic indicators, such as growth, the Baht, and household debt all point towards a hold.” HSBC expects Q4 20224 growth to “accelerate to as high as 3.7% y-o-y.”
- “Now that the THB depreciated to 34.4, there is no need to rush and cut monetary policy to weaken the Baht and help the economy's exporters.”
- HSBC estimates that seasonally adjusted headline and core both rose 0.1% m/m in November.
- “Authorities forecast headline CPI to accelerate to 1.2-1.3% y-o-y in December due to fuel prices (Bloomberg, 4 December 2024).”
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RBA: Consensus Expecting Easing Cycle To Start In Q1 2025 With 25bp Per Quarter
Analysts unanimously expect the RBA to keep rates unchanged at 4.35% when it announces its decision at 1430 AEST today. There are differences going forward though. Consensus is expecting the first rate cut in Q1 2025, likely on February 18, but there are still a number who don’t think it will be until Q2, likely May 20. If there are few significant changes to the November statement/forecasts then an extension of the prolonged hold is likely, but any softening of tone may signal an increased possibility of a February cut.
- Most economists expect easing to be gradual with 25bp per quarter in 2025 or less.
- CBA was the last of the domestic banks to expect a rate cut this year but it pushed that out to February following the Q3 CPI data, which it said did not show enough of a moderation in trimmed mean inflation for the RBA to ease in 2024.
- HSBC is only forecasting 50bp of easing in 2025 with the cycle starting in Q2 but it believes that there is a risk it could be later or that an easing cycle could be missed altogether. NAB expects a 25bp cut in February but also believes that the risks are skewed to a later start.
- In contrast, Goldman Sachs sees the risks tilted to earlier and faster easing than its expectation of a February start with 25bp per quarter with 35bp in Q4.
Sell-side OCR expectations bp
MNI: UK BRC OCT BY VALUE SHOP SALES LFL +0.3% YY, TOTAL +0.6% YY
- MNI: UK BRC OCT BY VALUE SHOP SALES LFL +0.3% YY, TOTAL +0.6% YY
UK DATA: BRC-KPMG Retail Sales Edged Up But Remain Subdued
UK total retail sales in October edged up 0.6% Y/Y, a softer pace of growth compared to September's solid reading of 2.0% Y/Y (also matched by a solid reading in the official ONS series - although the food vs non-food split was not reflected). Like-for-Like sales rose 0.3% Y/Y (vs 1.7% prior).
- The underlying trend shows sales remain subdued. Non-Food sales in the 3-months to October are the highest since June 2023 but Y/Y growth remains negative at -0.1% Y/Y. This is a value rather than volume series, so the change in sales figures also reflect changing inflationary trends.
- Food sales rose 2.9% Y/Y in the three months to October but remain impacted by low food price inflation.
- Data covers 29 September - 27 October 2024.
