Thailand yesterday held its key interest rate near a record low for a 13th straight meeting, opting for stability as the prospect of higher US borrowing costs weighs on Asian currencies and clouds the outlook for growth.
The Bank of Thailand (BOT) kept its one-day bond repurchase rate at 1.5 percent, with monetary policy committee members voting unanimously in favor, the central bank said in Bangkok.
All but one of 25 economists surveyed by Bloomberg predicted the decision.
Emerging nations are contending with capital outflows after the US Federal Reserve last week raised rates by a quarter-point and signaled three more increases may be warranted next year.
A year-long mourning period for Thai king Bhumibol Adulyadej and the prospect of a protectionist tilt in the US pose risks to the export-reliant economy, which is growing at the slowest pace among peers in Southeast Asia.
“The BOT will want to keep interest rates low to support the economy, which looks to have started the fourth quarter on a softer note,” Krystal Tan, an economist at Capital Economics Ltd in Singapore, said in a note.
“With inflation set to remain benign, we expect the BOT to stay on the sidelines and keep its policy rate on hold” throughout 2017, she said.
The SET index was little changed as of 2:10pm in Bangkok, while the baht was up 0.1 percent to 35.99 per US dollar. The baht has been among the biggest losers in Asia in the past month, dropping 1.4 percent against the US dollar.
Thailand’s economy struggled to gain traction this year as moderating consumer spending and a slump in trade curbed investment. Growth weakened to 3.2 percent from a year ago last quarter. Consumer prices rose 0.6 percent last month from a year earlier.
The central bank said it “assessed that the Thai economy would still be facing greater uncertainties going forward, particularly the fragile global economic recovery and uncertainties in the economic and monetary policy directions of major advanced economies that might induce greater capital flow and exchange rate volatility.”
Policymakers retained their 3.2 percent growth forecasts for this year and next year, and predicted exports will stop falling next year. Inflation is projected to return to the 1 percent to 4 percent target by the first quarter.
“Unless domestic demand in Thailand falters and inflation eases, we do not foresee a rate cut,” Tim Leelahaphan, a Bangkok-based economist at Maybank Kim Eng Securities Thailand PCL, said before the decision. “More likely, rates have upside risk to stem portfolio capital outflows caused by any Fed monetary tightening.”
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