Thailand Holds Interest Rate After Two Consecutive Cuts

The Bank of Thailand held its one-day bond repurchase rate at 1.5 percent, with monetary policy committee members voting unanimously in favor.

Thailand’s central bank held its benchmark interest rate after the government signaled borrowing costs may be low enough following two unexpected cuts.

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The Thai economy recovered at a pace close to the assessment at the previous meeting. Economic momentum in the first four months of 2015 softened due to sluggish private consumption and continued contraction in exports, as a result of a slowdown in the Chinese and Asian economies and a shift in global trade structure.

said the Committee in a press realease published earlier today.

Nevertheless, increased disbursement of public investment expenditure and continued improvement in tourism helped shore up the economy. In the periods ahead, the economy is projected to improve gradually, but subject to downside risks from slower-than-expected recovery of the global economy, especially China and other Asian economies.

Headline inflation continued to stay in a negative territory due mainly to energy costs and raw food prices. However, it is expected to pick up in the second half of the year as the base effect of high oil prices begins to wane, coupled with expected rises in oil and raw food prices. Meanwhile, core inflation was still positive but declined somewhat owing to subdued demand-side pressure.

Nevertheless, in the Committee’s assessment, the risk of deflation remains low, as consumption continues to increase, while the prices of most goods and services still increase or stay unchanged, and inflation expectations are close to the inflation target.

On April the 29th, The Bank of Thailand had reduced the policy rate by 0.25 percentage point from 1.75 to 1.50 percent per annum, in a surprise move.

Key considerations for policy deliberation were then as follows.

The Thai economy is projected to recover at a slower pace than assessed in the previous meeting. The pickup in public investment and positive trend in tourism should help shore up the economy, but could not fully offset the weaker-than-expected exports of goods and private consumption in the first quarter of 2015.

Source : Bank of Thailand Website