Thailand’s central bank kept its policy interest rate unchanged for a third straight meeting as economic growth quickened, resisting the government’s calls for monetary easing to cool the baht’s gains.
The Bank of Thailand held its one-day bond repurchase rate at 2.75 percent, with the monetary policy committee voting six to one to hold, it said in Bangkok yesterday. Seventeen of 20 economists in a Bloomberg survey predicted the decision, while three called for a quarter of a percentage point cut.
Bank of Thailand Governor Prasarn Trairatvorakul earlier this month said he was under no pressure to lower borrowing costs even after Thai Finance Minister Kittiratt Na-Ranong renewed calls for further cuts to discourage inflows that boosted the baht to a 17-month high last month.
A report this week showed the economy grew 18.9 percent last quarter from a year earlier, faster than estimated, as the nation’s recovery from the floods of 2011 gathered pace.
“It’s not worth trading the short-term gain of a weaker baht for risks of financial stability from a rate cut,” Kampon Adireksombat, an economist at Tisco Securities Co, said before the decision. “The economy is strong and inflation risks may re-emerge later this year. There is no reason to ease monetary policy further.”
The monetary authority will monitor capital flows closely and take action if needed, it said in a statement yesterday.
One person voted to cut the key rate by 25 basis points, it said.
Thailand is an “attractive place for hot money” because regulations are not as tight as in China, Bank of Thailand Chairman Virabongsa Ramangkura said late on Monday.
“No matter what regulations or barriers you have,” money will flow toward higher yields, he said, adding that while he was concerned, he could not think of measures that need to be used to slow inflows.
The economy grew at its fastest pace in at least 19 years last quarter after a slump in the corresponding period in 2011, when the worst floods in almost 70 years disrupted output by manufacturers from Western Digital Corp to Honda Motor Co.
Expansion is forecast to be as much as 5.5 percent this year.