Thailand keeps 1½% rate, expects continued recovery, but risks rose

By Wendy Van Sickle

Columbus, Ohio, Dec. 21 – Bank of Thailand’s Monetary Policy Committee again voted unanimously to hold the policy rate at 1½% at its meeting on Wednesday, according to a government notice.

In doing so, the committee judged that the economy would continue to recover gradually, as previously assessed, although downside risks increased.

Tourism was affected more than expected by recent measures to curb illegitimate tour operators, the committee said, and private investment remained low.

However, the negative impact on growth was offset by improvements in exports of goods due, and private consumption increased due to farm income and the government’s short-term stimulus measures.

Since the committee’s last meeting, “risks to growth tilted further to the downside due to Thailand’s trading partners which might record weaker-than-expected growth, uncertainties in the direction of the US trade policies that would have significant implications for confidence and international trade, and the number of Chinese tourists that could turn out lower than projected,” the committee said in a statement.

“Meanwhile, uncertainties pertaining to political developments in Europe as well as concerns over the European and Chinese financial sectors continued to warrant close monitoring.”

Headline inflation is expected to gradually rise and return to the target band within the first quarter of 2017, with the timing to be dependent on future oil and fresh food prices.

Monetary conditions remain conducive to the economic recovery with low real interest rates and ample liquidity in the financial system, the bank said.

“The committee viewed that monetary policy should remain accommodative, and stands ready to utilize an appropriate mix of available policy tools in order to ensure that monetary conditions are conducive to the economic recovery, while ensuring financial stability,” according to the notice.

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.

© 2015 Prospect News.
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