Thai economy: No change to policy rate

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ECONOMY
No change to policy rate
The Nation

BANGKOK: -- The Bank of Thailand's Monetary Policy Committee today decided to maintain the policy rate at 2 per cent, despite expectations from research houses that monetary policy should be relaxed to give a boost to the weaker-than-expected economic recovery.

Only two members of the 7-member committee voted for a 25-basis point rate cut at today’s meeting, assessing that monetary policy should be eased

against higher downside risks to global growth and low inflationary pressure. The other five however judged that the current policy stance remains sufficiently accommodative given a steady path of economic recovery in 2015, and is consistent with long-term financial stability objective, according to the Bank of Thailand’s statement.

"Going forward, members agreed that monetary policy should remain accommodative in order to reinforce the momentum of economic recovery. Another

important factor would be for the government to ensure that the disbursement of public spending goes as planned," said Mathee Supapongse, secretary of the MPC.

Discussed at the meeting was the latest economic condition. In the third quarter of 2014, the Thai economy expanded slowly as expected, with domestic private spending being the main growth driver. In 2015, the economy should continue to recover, albeit at a rate lower than formerly assessed. A less-than-expected

government spending weighs on private investment as most businesses await the implementation of public investment plans. In addition, a recovery in exports of goods is subject to the more uncertain global economic outlook.

Nevertheless, tourism is expected to turn more positive, but remains somewhat below the normal level. Headline inflation trended downward due to energy prices, and is projected to remain subdued for some periods ahead, in line with global oil prices. Core inflation slightly decelerated in tandem with lower demand pressure as a result of slow economic recovery. Meanwhile, risks to financial stability from a period of low interest rates are contained.

It is believed that the persistently high household debt, now about 80 per cent of gross domestic product, poses a big concern on financial stability to the central bank. Lower rates will spur borrowing.

In his opening remark to the "OECD/Thailand Seminar on Financial Inclusion and Financial Literacy in Asia" conference yesterday, Bank of Thailand Governor Prasarn Trairatvorakul mentioned three reasons that influence adverse decision on saving and spending: poverty, consumerism, and ignorance.

"Even with a well-designed financial education program with meaningful messages and effective delivery channels, financial literacy cannot be achieved

if consumers neglect the necessity and benefits of appropriate personal financial management," he said.

Source: http://www.nationmultimedia.com/business/No-change-to-policy-rate-30250040.html


-- The Nation 2014-12-17

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Bank of Thailand keeps key interest rate unchanged at 2%
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BANGKOK, Dec 18 -- The Bank of Thailand (BoT) Monetary Policy Committee (MPC) yesterday acted to retain the key interest rate unchanged at 2 per cent, according to MPC Secretary Mathee Supapongse.

Mr Mathee, BoT Assistant Governor for the Monetary Policy Group, said the MPC voted 5 to 2 to maintain the policy rate at 2 per cent per annum while two members voted to reduce the policy rate by 0.25 per cent per annum.

He said the majority viewed that the rate 2 per cent was suitable for the national economy next year.

Mr Mathee said the resolution was based on the idea that the rate already represented an easing monetary policy that would suit the Thai economy as it was expected to recover in 2015.

The rate would help guarantee monetary stability in the long run, he explained.

The minority in the MPC wanted to cut the rate by 0.25 per cent as the Thai economy recovered slowly in the third quarter of this year, economic stimulation by government investment was smaller than expected, investment in the private sector consequently slowed down, the global economy remained uncertain and tourism picked up more slowly than usual, he said.

He urged the government to disburse its budgets as planned.

Mr Mathee also said that the Bank of Thailand would announce its downward revision of the 2014 and 2015 economic growth forecast on Dec 26.

The falling global oil price resulted in lower production costs and inflation but deflation was unlikely, he said. (MCOT online news)


-- TNA 2014-12-18