Thailand keeps 1½% rate, expects delay in inflation’s return to target

By Wendy Van Sickle

Columbus, Ohio, Aug. 3 – Bank of Thailand’s Monetary Policy Committee again voted unanimously to hold the policy rate at 1½% at its meeting on Wednesday.

In doing so, the committee judged that the economy would continue to recover gradually despite greater downside risks due to global economic uncertainty and that inflation would return to the target band, although possibly slightly later than previously assessed due to weaker-than-expected energy prices, according to a government notice.

The country’s economy is expected to continue its expansion, driven by public expenditure and the tourism sector. Downside risks, however, including uncertainties following the Brexit referendum, concerns over the European financial sector and political developments abroad, have increased since the committee’s last meeting.

Monetary conditions remain conducive to the economic recovery as reflected in low real interest rates and a continued expansion in total corporate financing and household credits, the bank said, adding that financial stability risks from the prolonged low interest rate environment, including search-for-yield behavior, continue to warrant close monitoring.

Meanwhile, headline inflation softened slightly in July on fresh food prices, while core inflation remained stable.

As previously reported, the committee last lowered the rate by 25 basis points to 1½% in April 2015 and, before that, by 25 bps to 1¾% in March 2015 and by 25 bps to 2% in February 2015.

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