Thailand holds rate, stance to remain accommodative

September 16, 2015

By CentralBankNews.info
    Thailand’s central bank left its key policy rate at 1.50 percent, as expected, saying its policy stance looking forward should remain “sufficiently accommodative” but it stands ready to use a mix of policy tools to support the economic recovery.
   The Bank of Thailand (BOT), which cut its rate in March and April by a total of 50 basis points, added that exchange rate conditions also remain supportive of the economy and from the second quarter of the year the country’s economy gradually recovered.
    While confidence in the private sector and spending has been weighed down by the contraction in exports due to the slowdown in China and Asia, the BOT added the continuing improvement in tourism and public investment spending, along with new fiscal stimulus measures, should provide additional support.
    The Thai baht started depreciating against the U.S. dollar in April this year and was trading around 36 to the dollar today, down 8.6 percent this year.
    Thailand’s Gross Domestic Product expanded by 0.4 percent in the second quarter from the first quarter for annual growth of 2.8 percent, slightly below the 3.0 percent rate in the first quarter.
    Last month the BOT said growth this year would be less than the 3.0 percent forecast in March – still up from 0.9 percent in 2014 – and its new estimate will be issued on Sept. 25.
    The BOT still expects inflation to remain negative for the rest of this year before turning positive in the first quarter of next year.
    This is a downgrade from last month when the BOT said it expected inflation to slowly pick up in the second half of this year but added that the point when consumer prices start to rise might be delayed due to low oil prices and limited demand-side pressures.
    However, the BOT also said deflationary risks remain contained as core inflation is positive and inflation expectations remain close to its target of 2.50 percent, plus/minus 1.5 percentage points.
    Consumer price inflation was minus 1.9 percent in August, up from 1.05 percent in July.

        The Bank of Thailand issued the following statement:

“The Committee voted unanimously to maintain the policy rate at 1.50 percent.
Key considerations for policy deliberation are as follows.

From the second quarter to July 2015, the Thai economy gradually recovered. Private sector confidence and spending have been weighed down by continued contraction in exports of goods, a result of a slowdown in the Chinese and other Asian economies, as well as sluggish household income. Nevertheless, continued improvement in tourism and accelerated disbursements of public investment expenditure have been the main drivers for the economy. Moreover, the recently announced fiscal stimulus measures should provide some additional support.

Inflationary pressure declined due mainly to lower-than-expected oil prices. Consequently, headline inflation is projected to stay in negative territory for the rest of 2015, before turning positive in the first quarter of 2016, later than previously assessed. Meanwhile, deflationary risks remain contained as core inflation is positive, reflecting that prices of most non-energy items have been stable or trended upwards. Furthermore, inflation expectations stay close to the inflation target.

Under the Committee’s assessment, the Thai economy continues to face negative factors, particularly a slowing global economy and higher volatility in the global financial markets. However, monetary conditions, including exchange rate development, remain supportive to the economic recovery.

Against this backdrop, the Committee decided to maintain the policy rate at this meeting. Looking forward, monetary policy stance should continue to be sufficiently accommodative. The Committee stands ready to utilize an appropriate mix of available policy tools in order to support the economic recovery, while ensuring financial stability.”

www.CentralBankNews.info

9 years ago