Archive

Thailand: Policy Rate Held At 1.75% (Consensus 1.75%) in Jun-25

• The Bank of Thailand maintained its policy rate at 1.75% by a 6-1 vote, in line with expectations, citing robust first-half growth but heightened risks from US trade policy and global uncertainties.
• Despite raising its 2025 growth forecast to 2.3%, the MPC flagged a likely economic slowdown in the second half of the year, subdued inflation well below target, and negative credit growth as key factors influencing future rate decisions.
• The Committee signalled a data-dependent approach, preserving limited policy space and indicating that further rate cuts would require a significant deterioration in growth or inflation outlook.

Defence Spending Is Not Stimulative

• NATO raised its target for defence spending to 5% of GDP, with Spain opting out. This increases pressure for tighter monetary conditions than were otherwise appropriate.
• Defence spending offers weak growth multipliers, so the policy is more likely to stoke deficits than productivity. Central banks may respond with a more hawkish stance.
• With debt levels already high, the move risks crowding out other spending and lifting sovereign risk premiums. Bond yields suffer from higher deficits and future rates.

By Philip Rush

Israel/Iran/US: Ten Pointers

• ‘Events’ over the past four days have underlined how hard it is to forecast with any degree of confidence how the Iran/Israel conflict will unfold. However, and recent headline-driven volatility notwithstanding, the supply/demand equation continues to dominate market thinking on oil.

By Alastair Newton

Growth Broadly Back In The Black

• PMI recoveries extended in June, taking averages above 50 as manufacturing is its strongest since Sep-22, and services almost align with its averages of recent years.
• The UK survey balances suffered from bad vibes, so they are the primary beneficiary of sentiment improving. Their recovery can extend further as vibes improve.
• Broad expansion helps labour demand to keep pace with supply, denying doves proof of a disinflationary demand shock. Without that, cuts roll later and may not resume.

By Philip Rush