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BOT maintains policy rate

Seetalavajit Sabayjai

The Nation

The Bank of Thailand's Monetary Policy Committee did not surprise the markets with today's decision to hold the policy rate at 3.50 per cent, following serious damage from floods and weakening in the global economy.

This is the first time in nearly two years that the MPC put the policy rate on hold. Since December 2010, the policy rate had been raised 7 times, by 25 basis points each. The decision was anticipated.

The MPC voted 6 to 1 to leave the rate unchanged. One member preferred a rate cut of 25 basis points, said Paiboon Kittisrikangwan, assistant governor.

The MPC is of the view that though inflation pressure continues to remain high on domestic demand, inflation expectation is sustained, he said.

"The current policy rate should help contain price pressure and support the economy in light of more negative factors on the global economy and unfinished consequences of the floods,"

-- The Nation 2011-10-19

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Flood-hit Thailand holds benchmark rate steady

BANGKOK, October 19, 2011 (AFP) - Thailand's central bank left its main interest rate unchanged on Wednesday, pausing after a series of hikes as the country's worst floods in decades take a heavy toll on the economy.

The Bank of Thailand's monetary policy committee voted six to one in favour of keeping the benchmark lending rate at 3.5 percent, where it has remained since its last meeting in August.

Thailand had lifted its key interest rate by 225 basis points since July 2010 to battle inflation, which stands around four percent on an annualised basis.

But monetary authorities are grappling with signs of a global economic slowdown along with the fallout of severe floods that have caused widespread damage to homes, business, factories and farmland.

The natural disaster "will substantially curtail economic growth in the remaining part of the year compared with our previous projections," said the Bank's assistant governor Paiboon Kittisrikangwan.

He added that Europe's debt crisis had also affected prospects for the world economy, but expressed confidence the Thai economy would continue to grow next year.

"The tourism industry is not likely to be affected significantly if the floods ease," Paiboon added.

Three months of heavy monsoon rains have killed more than 300 people in Thailand and forced tens of thousands to seek refuge in shelters.

Currently, about one-third of Thailand's provinces are affected, mostly in central and northern regions.

Commerce Minister Kittirat Na-Ranong said more than half a million people have been left without work after many factories were inundated, but he was optimistic that foreign investors would not abandon the kingdom.

"Investors still have confidence in Thailand, but they want a concrete plan to prevent such disasters happening again," he told reporters.

Most of Thailand's main tourist attractions -- including the southern islands -- have been unaffected by the floods and dykes have been bolstered at Bangkok's main airport, Suvarnabhumi, which is operating as usual.

-- (c) Copyright AFP 2011-10-19