Thailand keeps key rate unchanged as fiscal spending takes lead

Thailand's central bank kept its key interest rate unchanged for the fourth straight meeting.
Thailand's central bank kept its key interest rate unchanged for the fourth straight meeting.PHOTO: BLOOMBERG

BANGKOK (BLOOMBERG) - Thailand's central bank kept its key interest rate unchanged for the fourth straight meeting as it waits to assess whether government stimulus spending will succeed in boosting weak local demand.

The Bank of Thailand held its one-day bond repurchase rate at 1.5 percent, with monetary policy committee members voting unanimously in favor, it said in Bangkok on Wednesday. Twenty-two economists surveyed by Bloomberg News predicted the decision, while one forecast a quarter-of-a-percentage-point cut.

Governor Veerathai Santiprabhob signaled after taking office last month that monetary policy will play a supportive role, but government spending and investment will drive the recovery and the economy should start to see the full benefit of state stimulus next year. Prime Minister Prayuth Chan-Ocha this week pledged an additional 13 billion baht (S$511.51 million) to help rubber farmers cope with a price slump and extended some tax incentives to encourage new investment.

"There is less need for a further boost from monetary policy now with fiscal policies taking the lead," Sarun Sunansathaporn, an economist at Bangkok-based Bank of Ayudhya Pcl, said before the decision. "With limited policy space, the central bank should save its bullets for when it's really necessary."

Many Thai economic indicators have remained in negative territory this year, though there have been some signs of improvement in recent months. Exports shrank 5.51 per cent in September from the same period last year compared with a 6.69 per cent contraction a month earlier, and industrial output fell 3.63 per cent, from an 8.29 per cent slump in August.