Thai central bank holds key rate at 1.50%, says current policy rate supportive to growth

The Monetary Policy Committee (MPC) voted 7-0 to leave the one-day repurchase rate at 1.50 per cent, near record lows.
The Monetary Policy Committee (MPC) voted 7-0 to leave the one-day repurchase rate at 1.50 per cent, near record lows.PHOTO: BLOOMBERG

BANGKOK (REUTERS) - Thailand's central bank left its benchmark interest rate unchanged for a third straight meeting on Wednesday, as widely expected, saying a weak baht and recently unveiled stimulus measures should be supportive to economic growth.

The Bank of Thailand said monetary policy would continue to be accommodative to help the economy that is expected to grow less than 3 per cent this year as there are "more negative factors than positive ones, especially from overseas."

The Monetary Policy Committee (MPC) voted 7-0 to leave the one-day repurchase rate at 1.50 per cent, near record lows.

Last month, the committee also unanimously voted for no change. It unexpectedly cut the rate in two back-to-back meetings in March and April to try to shore up confidence.

"The Thai economy continues to face negative factors, particularly a slowing global economy and higher volatility in the global financial markets," the MPC said in a statement after the meeting. "However, monetary conditions, including exchange rate development, remain supportive to the economic recovery."

The MPC reiterated that a weakening of the baht was supporting the economic recovery. The baht has depreciated about 8.6 per cent against the dollar so far this year and policymakers are hoping it will lift sagging exports.

The military government has struggled to move Southeast Asia's second-largest economy forward since seizing power in May 2014 to end months of political unrest as exports have long been weak and high household debt has crimped domestic demand.

Twenty of 21 economists polled by Reuters had predicted no change and one predicted a 25 basis-point cut.

Still, some economists think a further rate cut is possible. "With the economy still in deflation and struggling for momentum, we think it is too soon to rule out a further rate cut this year," said Capital Economics. "Overall, we still think there is a chance that the BOT will make one more 25 bp cut this year if growth continues to disappoint despite the government's fiscal efforts," it added.

Annual consumer prices have declined for eight straight months, giving policymakers more leeway to ease.

The central bank said on Wednesday it expected consumer prices to rise in the first quarter of next year.

Growth was forecast to come in at less than 3 percent this year, after growth was just 0.9 percent last year, the lowest since flood-hit 2011. The central bank is due to give a new estimate on Sept. 25.