BANGKOK (REUTERS) - Thailand's central bank on Wednesday left its already-low benchmark interest rate steady again, signalling its belief that the weakening baht can aid exports and economic recovery better than a rate cut can.
The Bank of Thailand said its 2015 growth forecast of 3.0 per cent is being lowered again, due to poor exports, but said it won't give the new one until Sept. 25.
The Monetary Policy Committee (MPC) voted 7-0 to leave the one-day repurchase rate at 1.50 per cent. In June, it also voted unanimously to hold, following 25 basis point cuts in March and April.
Twenty of 23 economists in a Reuters poll predicted no change on Wednesday.
"The conduct of monetary policy has thus far eased monetary conditions, while the direction of exchange rate movement has stayed conducive to the economic recovery," the MPC said in a statement after Wednesday's meeting.
The economy continued to recover gradually in the second quarter, and is expected to maintain the similar pace of recovery for the rest of the year, but downside risks increased from a slowdown in the Chinese economy and a domestic drought, it added.
The central bank expected the Fed to raise rates in September but was confident the move would not cause big risks for Thai financial markets, Mathee Supapongse, secretary of the MPC, told a briefing. "The spectre of the Fed's lift-off is also suspected a factor to stay the hands of the MPC members" from cutting, said Kobsidthi Silpachai, head of capital markets research at Kasikornbank in Bangkok.
Faraz Syed, economist of Moody's Analytics in Sydney, said economic signs are "still quite grim" and there might be a rate cut towards year-end "particularly if demand indicators fail to pick up".
The military government has been unable to move Southeast Asia's second-largest economy forward and two key engines, exports and domestic demand, are not firing.
The economy grew only 0.9 per cent last year.
Mr Mathee said the baht's weakness "is helping economic growth even though the pace may be a little fast but the direction is beneficial."
On Wednesday, the baht stayed at 35.11 against the dollar after the rate decision. The baht has depreciated 6.2 per cent this year and the government is hoping it will boost sagging exports.
Deputy Prime Minister Pridiyathorn Devakula told Reuters last month a weaker baht would help growth more than a rate cut.
Exports tumbled in June at the steepest annual rate since late 2011 and are expected to contract for the third year in 2015.