Thai central bank stands pat despite seeing economic growth slow

[webfact]

Thai central bank stands pat despite seeing economic growth slow

By Orathai Sriring and Kitiphong Thaichareon

 

FILE PHOTO: A view of the Bank of Thailand in Bangkok, Thailand April 26, 2016. REUTERS/Jorge Silva/File Photo

 

BANGKOK (Reuters) - Thailand's central bank on Wednesday left its benchmark rate where it has been since December, as expected, saying policy is accommodative enough to aid a slowing economy as global and domestic uncertainties remain high.

 

The Bank of Thailand (BOT), which in December hiked the benchmark for the first time since 2011, voted unanimously to keep the one-day repurchase rate at 1.75 percent - half a point above the record low.

 

All 19 economists polled by Reuters predicted Wednesday's hold, and most see no change for the rest of the year.

 

(Asian central bank policy rates - http://tmsnrt.rs/1U5hc2W)

 

(Thai Policy interest rate, GDP and CPI -

 

The bank's monetary policy committee (MPC) said the Thai economy "would expand at a slower pace" this year than its latest forecast of 3.8 percent.

"Overall financial conditions remained accommodative and conductive to economic growth... there were risks to financial stability in the future that warranted continued monitoring," it said.

 

Kobsidthi Silpachai, head of capital markets research at Kasikornbank, said his reading of Wednesday's statement is that policymakers "are still anxious" about the accumulation of household debt spurred by persistent low interest rates.

 

With an increasing number of other central banks "changing their feathers to doves rather than hawks, along with subdued inflation and sub 4 percent economic growth, such conditions will see the MPC keeping rates at 1.75 percent for the remainder of 2019," he said.

 

Earlier on Wednesday, New Zealand's central bank became the latest in Asia-Pacific to cut rates. India cut last month, Malaysia did on Tuesday and the Philippines is expected to do so on Thursday.

 

NO NEED TO FOLLOW

Last month, BOT Governor Veerathai Santiprabhob told Reuters that Thailand had no need to follow the policy decisions of other countries and that its policy rate was low compared with others.

 

He said the central bank had yet closed the door to a possible rate hike while risks to financial stability remained.

 

Headline inflation is benign, at 1.23 percent in April, near the low end of the BOT's 1-4 percent target range.

 

In 2018, Thailand had its strongest expansion in six years, at 4.1 percent, but growth is faltering due to weaker exports.

 

In March, the central bank cut its 2019 growth forecast for a second time in three months, to 3.8 percent from 4.0 percent.

 

The economy also faces political risks at home as the outcome of a March 24 election is unclear until after official results are due, later on Wednesday.

 

The BOT said the baht was still moving in line with regional currencies. The currency has appreciated about 2 percent against the dollar this year, making it the best performing Asian currency.

 

(Additional reporting by Satawasin Staporncharnchai; Editing by Richard Borsuk)

 

-- © Copyright Reuters 2019-05-08

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[ftpjtm]

With so many other Asian nations cutting rates, this will drive the Baht valuation up in comparison with them. Not good for manufacturers or tourism, but good for importers.

[Srikcir]

17 hours ago, webfact said:

The BOT said the baht was still moving in line with regional currencies. The currency has appreciated about 2 percent against the dollar this year, making it the best performing Asian currency.

If the baht is the best performing Asian currency, then it is NOT moving in line with regional currencies. 

The Commerce Ministry seems to understand the high value baht issue (Feb. 2019):

• The strong baht, Asia's best-performing currency this year, has increasingly hurt exports, particularly rice orders. https://www.reuters.com/article/thailand-economy-trade/thai-jan-exports-fall-57-pct-y-y-a-bigger-drop-than-forecast-idUSB7N1WB02P