By Central Bank News
The Bank of Thailand (BoT) kept its policy rate unchanged at 3.0 percent, as expected, saying the domestic economy remained robust despite a higher drag on activity from slower global demand.
Two of the members of the Monetary Policy Committee voted to cut the policy rate by 25 basis points while three members voted to maintain the rate, which has been unchanged since January, when it was cut by 25 basis points. Last month two members also voted to cut rates.
The bank’s policy rate hit a recent peak in October last year at 3.50 percent and have been heading lower since November when the first cut in rates came.
“The MPC viewed that the impact of slower global demand on the Thai economy had increased to some extent. Nonetheless, domestic demand remained robust and current monetary conditions were accommodative enough to support continued economic expansion. Credit growth in some sectors had been rapid and warranted close monitoring,” the BoT said.
Thailand’s economy expanded by 3.3 percent in the second quarter for an annual growth of 4.20 percent, a sharp improvement from first quarter’s 0.4 percent expansion.
The Thai central bank, which has been under pressure by the government to cut interest rates, said the domestic economy grew at a faster rate in the second quarter than previously forecast and strong momentum in consumption and investment was likely to sustain the trend, along with the positive contribution of government stimulus measures.
“Nonetheless, the impact of slowing global demand on Thai exports would become more apparent and it was possible that export growth this year would be lower than expected,” the bank said.
It added that inflation was expected to moderate further and remain within the bank’s target.
The inflation rate in Thailand was steady in August at an annual rate of 2.7 percent. The BoT targets inflation of 3.0 percent.
