By CentralBankNews.info
The Thai central bank maintained its policy rate of 2.0 percent, as expected, but said two of the members of its policy committee voted to cut the rate by 25 basis points to provide further support to the economy, which is expected to expand at slower pace in 2015 than projected.
The Bank of Thailand (BOT), which cut its rate by 25 basis points in March, said headline inflation had trended downward due to energy prices and was projected to remain subdued for some period while core inflation decelerated due to lower demand.
Thailand’s Gross Domestic Product expanded by 1.1 percent in the third quarter from the second quarter for annual growth of 0.6 percent, slightly up from 0.4 percent in the second quarter.
The BOT said domestic private spending was the main driver of growth while less-than-expected government spending was weighing on private investment as most businesses were waiting for public investment plans to proceed. In addition, exports are held back by the uncertain global outlook.
“Going forward, members agreed that monetary policy should remain accommodative in order to reinforce the momentum of economic recovery,” the BOT said.
Thailand’s headline inflation rate fell to 1.26 percent in November from 1.48 percent in October while core inflation eased to 1.6 percent from 1.67 percent. The BOT targets core inflation of 0.5-3.0 percent.
The Bank of Thailand issued the following statement:
Key considerations for policy deliberation are as follows.
In the third quarter of 2014, the Thai economy expanded slowly as expected, with domestic private spending being the main growth driver. In 2015, the economy should continue to recover, albeit at a rate lower than formerly assessed. A less-than-expected government spending weighs on private investment as most businesses await the implementation of public investment plans. In addition, a recovery in exports of goods is subject to the more uncertain global economic outlook. Nevertheless, tourism is expected to turn more positive, but remains somewhat below the normal level.
Headline inflation trended downward due to energy prices, and is projected to remain subdued for some periods ahead, in line with global oil prices. Core inflation slightly decelerated in tandem with lower demand pressure as a result of slow economic recovery. Meanwhile, risks to financial stability from a period of low interest rates are contained.
In deliberating monetary policy, most members judged that the current policy stance remains sufficiently accommodative given a steady path of economic recovery in 2015, and is consistent with long-term financial stability objective. Nevertheless, two members assessed that against the backdrop of higher downside risks to global growth and low inflationary pressure, monetary policy should be eased in order to add more support to the weaker-than-expected recovery.
Going forward, members agreed that monetary policy should remain accommodative in order to reinforce the momentum of economic recovery. Another important factor would be for the government to ensure that the disbursement of public spending goes as planned.”
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