Thailand Holds Interest Rate But Says Ready To Act

Thailand holds interest rate but says ready to act

Bangkok, July 25, 2012 (AFP) - Thailand's central bank left its benchmark interest rate unchanged at 3.0 percent on Wednesday, warning that the worsening global economic situation was weighing on Asian exports.

The Bank of Thailand said it stood ready to act if needed, but stopped short of following in the footsteps of some other Asian central banks by easing official borrowing costs.

"Risks to the global economy increased further as weaknesses in consumer spending and the labour market dampened US economic growth, while a comprehensive resolution to the eurozone crisis remained elusive," BoT assistant governor Paiboon Kittisrikangwan said in a statement.

"A slowing global economy weighed on Asian and Chinese exports, which continued to soften. Waning global demand was reflected in moderating global price pressure."

The Bank trimmed its growth forecasts for the Thai economy in 2012 to 5.7 percent, from a previous projection of 6.0 percent, and lowered its prediction for 2013 to 5.0 percent, from 5.4 percent.

It lowered interest rates in January and November to stimulate the economy following floods which devastated large swathes of the kingdom last year, temporarily shutting down many factories.

The Thai economy has recovered steadily from the floods and was "close to potential", supported by lower interest rates, good employment opportunities and government stimulus measures, Paiboon said.

"These factors should continue to sustain private consumption and investment expenditures going forward," he added.

But in a possible sign of another rate cut in the future, two members of the bank's seven-person monetary policy committee voted in favour of a quarter-point reduction at Wednesday's meeting.

Thailand's economy grew 11 percent in the first quarter of 2012 from the previous three-month period, rebounding sharply from the fallout of last year's devastating floods, according to an official estimate.

Inflation slowed to about 2.5 percent in April, from 3.5 percent in March.

-- (c) Copyright AFP 2012-07-25