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Bank of Thailand holds key rate steady, eyes on strong baht
The Bank of Thailand on Wednesday left its benchmark interest rate unchanged again at 1.5%, showing it feels the level is low enough to aid an economic recovery hampered by high household debt levels.
As expected, the Monetary Policy Committee voted unanimously to keep the one-day repurchase rate at 1.5%, where it has been since April 2015.
The MPC reiterated its long-held view that the current rate supports economic recovery, and that domestic liquidity is ample.
It said Thailand’s growth outlook “improved further on the back of the expansion in merchandise and services exports.
Meanwhile, domestic demand continued to expand at a gradual pace, although it was not sufficiently broad-based.”
Inflation has been very low, and that gives the BoT room to cut its key rate, but the central bank doubts a cut would aid growth and it could exacerbate problems with already-high levels of household debt.
BoT Assistant Governor Jaturong Jantarangs told reporters that there was no need to cut rates further, even though inflation might return to its 1-4% target range later than expected.
Many economists agree the central bank can keep policy unchanged.
“There is no pressing need for the BoT to adjust rates any time soon,” said Shilan Shah of Capital Economics. “With the economy showing clear signs of recovery, monetary loosening seems unlikely.”
All 21 economists polled by Reuters forecast no policy change on Wednesday, and most expect no change for the rest of this year.
While the central bank is counting on fiscal spending to aid economic growth, which still lags regional peers, public investment growth was softer than expected, the MPC said.
The strength of the baht, now at more than two-year highs against the US dollar, has been getting increasing attention.
Source: http://www.bangkokpost.com/business/news/1307260/bank-of-thailand-holds-key-rate-steady-eyes-on-strong-baht