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POLICY RATE

MPC keeps policy rate on hold

The Nation

BANGKOK: -- The Bank of Thailand's Monetary Policy Committee today unanimously decided to maintain the policy rate at 3 per cent, chiefly because of greater external factors led by the deepening of the eurozone crisis.

Growth is now a major risk to Thailand’s economy, rather than inflation, said Paiboon Kittisrikangwan, secretary of the MPC.

The rate should be maintained to support economic recovery, but the MPC will closely monitor the global factors and promptly react to changes, he added.

Paiboon explained that the euro crisis, reflecting through chaos in Spain banking sector, could weaken the Euro area’s growth more than expected and this could also affect the US economic recovery. China’s economic slowdown also contributes to weak global growth. Still, the MPC is confident that strong demand in Asia as well as room for additional stimulus measures would help cushion the global weaknesses.

On Thailand’s economy, the recovery pace was better than expected in the first quarter and the momentum is expected to proceed, thanks to high loan growth and stimulus measures. A concern is the recovery pace may slow down, should the euro area’s demand for Thai exports has fallen sharply.

While commodities prices are falling in line with global demand, the minimum wage hike as well as hikes in energy prices keep the inflation expectation at the high level. "Inflationary pressure remains, but at a lesser extent than before."

-- The Nation 2012-06-13

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Bank of Thailand keeps key interest rate unchanged at 3%

BANGKOK, June 13 – The Bank of Thailand (BoT)’s Monetary Policy Committee (MPC) on Wednesday opted to maintain the policy interest rate at 3 per cent, citing concerns over worsening eurozone debt crisis.

MPC Secretary Paiboon Kittisrikangwan said the decision, agreed unanimously, was widely anticipated by market analysts.

"The MPC assessed that the balance of risks for the Thai economy was skewed towards growth rather than inflation, primarily reflecting heightened global economic risks stemming from the large degree of uncertainty surrounding the economic problems in Europe," the MPC said in a statement released to the media.

"The MPC deemed it appropriate to maintain an accommodative monetary policy stance in order to support a firm recovery of the Thai economy and temper some of the risks coming from the global economy," it said.

The statement also noted that the Thai economy recovered faster than expected in the first quarter. This positive growth momentum was expected to be sustained going forward on the back of accommodative monetary conditions, robust private loan growth, and the implementation of government stimulus measures.

"However, should the eurozone crisis intensify, slower export growth could act as a drag on the economic recovery," it said.

Price pressure from production cost moderated following the reduction in oil and commodity prices against the backdrop of a softer global economic outlook.

Nonetheless, the pass-through of costs to prices of goods and services continued to be sustained by robust domestic demand, while inflation expectation remained elevated in light of the minimum wage hike and the energy price structure reform. Despite easing somewhat, overall inflationary pressure remained, the statement said. (MCOT online news)

-- TNA 2012-06-13