Thai central bank stands pat, signals it feels no hurry to tighten policy

The bank is in 'little hurry' to raise rates because of low inflation. — Reuters pic
The bank is in ‘little hurry’ to raise rates because of low . — Reuters pic

BANGKOK, March 16 — Thailand’s today left its key interest rate at the near-record low where it’s been for more than three years to support growth, saying inflation should stay in check and capital outflows are not pressuring monetary policy.

The Bank of Thailand’s (BOT) Monetary Policy Committee (MPC)voted 6-0 to keep the one-day repurchase rate at 1.50 per cent, as expected by all 18 economists in a Reuters poll.

At the last meeting in March, the vote to hold was 6-1, the first time in nearly three years the decision was not unanimous. One committee member did not attend Wednesday’s meeting.

The policy rate, a quarter-point above the record low, has been unchanged since a cut in April 2015.

Thailand’s accommodative monetary policy stance remains “conducive to the continuation of economic growth and should support the rise of headline inflation toward target in a sustainable manner, although the process would take some time,” the MPC said.

Annual headline inflation in April was the highest in 40 months, but just 1.07 per cent, moving into the central bank’s 1-4 per cent target range for the first time since February 2017.

The BOT is in “little hurry” to raise rates mainly because inflation is very low, said Krystal Tan of Capital Economics, which expects the benchmark to be held for the rest of 2018.

BOT Assistant Governor Jaturong Jantarangs said that compared with when the central bank issued 2018 forecasts in March, the economy has been gaining further traction.

Lift from exports

In March, the BOT raised its 2018 growth forecast to 4.1 per cent from 3.9 per cent and saw exports – a growth driver – up 7 per cent rather than the 4 per cent projected earlier.

The economy grew 3.9 per cent in 2017, the fastest pace in five years, but lagged the Philippines’ 6.7 per cent, ’s 5.9 per cent and Indonesia’s 5.07 per cent.

Strong exports and tourism have lifted growth for Southeast Asia’s second-largest economy. But domestic demand recovery is still at a nascent stage, crimped by high household debt and contracting farm incomes.

Foreign investors have been net sellers of about 100 billion baht (RM12.3 billion) of Thai stocks and bonds so far this year

Capital outflows are not yet pressuring Thailand’s monetary policy, although the baht is likely to remain volatile, Jaturong said.

“Monetary policy tightening in other countries is no pressure on us, as we have strong external positions,” he said.

The last time the BOT hiked its policy rate was August 2011, when it made a quarter-point increase to 3.50 per cent. — Reuters

Source: The Malay Mail Online

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