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Bank of Thailand keeps policy rate at 0.50 percent
The Monetary Policy Committee (MPC) assessed that despite the recent better-than-expected outturn, the Thai economy would recover slowly and need support from the continued low policy rate.
Nonetheless, the economic recovery would remain fragile and highly uncertain. The Committee thus voted to maintain the policy rate at this meeting and to preserve the limited policy space in order to act at the appropriate and most effective timing.
The Thai economy in the third quarter of 2020 improved more than expected. However, the recovery would remain slow and vary significantly among economic sectors.
Overall economic activities were projected to take approximately two years before returning to the pre-pandemic level.
Consequently, the labor market would remain fragile, especially as labor incomes remained low. This would in turn weigh on private consumption, particularly among low-income households, following a phase-out of temporary supporting factors.
Public expenditure was expected to be lower than previously assessed. The financial system remained sound, despite increasing vulnerabilities given the economic outlook and risks to the financial positions of businesses and households.
Meanwhile, headline inflation would be less negative in line with increasing energy prices and would stay close to the lower bound of the target range in 2021. Medium-term inflation expectations remained anchored within the target.
Despite ample liquidity in the financial system and low financing costs, some businesses, especially SMEs, and households in need of liquidity have not gained access to credits. The baht appreciated rapidly against the US dollar owing to risk-on sentiment following the US presidential election outcome and the progress of COVID-19 vaccine development.
The Committee expressed concerns over the rapid appreciation of the baht as this affected the fragile economic recovery. Therefore, the Committee would closely monitor developments in foreign exchange markets and capital flows as well as consider the necessity of implementing additional appropriate measures.
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