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Thailand – Experts: Central bank likely to keep rates steady
The Bank of Thailand (BoT) is expected to leave its benchmark interest rate near record lows again on Wednesday, with the current level seen supporting the country’s economic recovery while inflation stays benign.
The central bank is monitoring the effects of a strong baht on exports, but pressure to cut rates to hold it down has dissipated on improving global demand, recovering consumption and a pick-up in tourism. It has said financial conditions and ample liquidity are supportive of growth, and has warned of risks from a prolonged low interest rate environment.
All 18 economists in the poll forecast the BoT’s one-day repurchase rate will be kept at 1.50% – where it has been since April 2015 – when its monetary policy committee meets on Wednesday.
Southeast Asia’s second-largest economy grew at its fastest clip in more than four years in the second quarter largely due to stronger exports, a key driver of growth.
Gundy Cahyadi, economist at DBS Bank in Singapore, said: “The BoT is likely to take comfort in this, especially given political pressure from the government to resist further strengthening of the baht due to competitiveness concern.” He saw no policy change throughout 2018.
The strong baht and calls from the government and business groups for a rate cut failed to move the central bank at its September meeting.
The Monetary Policy Committee left its key interest rate unchanged even as it upgraded its 2017 economic growth forecast to 3.8% from 3.5%, and slightly revised its outlook for 2018 to 3.8% from 3.7%.
Annual headline consumer prices rose just 0.86% in October, but the BOT expects that to return to its 1-4% target band by the middle of 2018.
The BOT estimated annual growth for the July-September period at 4%, up from the June quarter’s 3.7% pace. It also said exports this year might beat its forecast. Official GDP data is due on Nov 20.
So far, the baht, which has risen nearly 8% against the US dollar this year, has not dented exports, but the government is worried that growth could take a hit next year if the baht climbs further.
All 14 analysts in the poll who had a year-end view on rates predicted no policy change. For 2018, eight of 10 analysts forecast rates would stay on hold, while two predicted a hike.
Prakash Sakpal, economist of ING in Singapore, said he scaled back his forecast for a rate cut before the end of 2017 to no policy change throughout 2018.
“However, the poor quality of growth and lack of inflation suggest the economy still needs stimulus,” he said, adding hopes were now on the government accelerating infrastructure projects.
The economy grew 3.2% last year.
Source: https://www.bangkokpost.com/business/news/1355775/experts-central-bank-likely-to-keep-rates-steady