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Thailand: BoT holds key rate steady, cites better growth outlook
Thailand’s central bank left its near-record-low key interest rate unchanged on Wednesday, as widely expected, amid signs of a strengthening economy and benign inflation.
The Bank of Thailand (BoT) said at its policy review current interest rates remain supportive of growth and it expects the economy to grow faster than previously assessed.
The Monetary Policy Committee (MPC) voted unanimously to keep the one-day repurchase rate at 1.50%, where it has been since April 2015. The rate is just a quarter-point above the record low.
All 18 economists polled by Reuters had forecast no policy change, and most also expected the central bank to stay on hold at its December meeting.
“Looking ahead, we think the BOT will be content to keep rates at their current low level over the next year or so,” said Krystal Tan, economist at Capital Economics. “With the economy on a firmer footing, further rate cuts are not necessary.”
The MPC reiterated its long-held view that the current rate and ample domestic liquidity supports Southeast Asia’s second-largest economy while there continues to be risks from a prolonged low interest rate environment.
“The Committee assessed that the Thai economy would grow at a faster pace than the previous assessment driven by growth in merchandise exports as well as continued improvement in domestic demand,” it said in a statement.
Financial stability remained sound but it would continue to monitor pockets of risks, it said.
The MPC stood pat on rates in September, shrugging off calls from the government and businesses for a rate cut to contain the baht’s strength.
Thailand’s economy grew at its fastest pace in more than four years in the second quarter largely due to stronger exports, prompting the government to raise its forecasts for 2017 and 2018 GDP.
Inflation is moving closer to the lower bound of the central bank’s target range of 1-4%, reducing the chances of a rate cut which could add to the problems of high household debt.
The BoT said in its statement that private consumption continued to expand, but earnings of low-income households had yet to sufficiently recover.
BoT Assistant Governor Jaturong Jantarangs told a news conference that inflation was expected to get back to the target by the middle of 2018.
Earlier on Wednesday, Finance Minister Apisak Tantivorawong said the BoT’s plan to propose the current inflation target range for 2018 “is acceptable”, but it must fully use every tool available to get inflation back to the band and make the economy grow at its full potential.
The MPC said the baht remained stable against the US dollar, and was largely unchanged relative to those of Thailand’s trading partners.
The baht, which has firmed 8% against the dollar so far this year, presents a headwind to the economy although the central bank said earlier exports could expand more than its forecast of 8% in 2017.
Source: https://www.bangkokpost.com/business/finance/1356871/bot-holds-key-rate-steady-cites-better-growth-outlook