Thailand Monetary Policy


Bank of Thailand keeps one-day repurchase rate on hold

At its 17 December monetary policy meeting, the Bank of Thailand (BoT) decided to maintain the one-day repurchase rate at 2.00%. Two of the seven members of the committee voted in favor of cutting the rate by 25 basis points. The decision was expected by the markets. The one-day repurchase rate currently sits at the lowest level in almost four years. The next monetary policy meeting is scheduled for 28 January 2015.

According to the Bank, Thailand’s economic performance in the third quarter was disappointing. GDP grew less than expected and the expansion was backed only by an improvement in domestic private spending. For next year, the Bank acknowledged that the economy will increase in momentum, albeit at a rate lower than previously assessed. Headline inflation has decreased due to lower energy prices and, “is projected to remain subdued for some periods ahead, in line with global oil prices.”

The Monetary Policy Committee has recently decided to shift the monetary policy target from core inflation to headline CPI inflation. The change will take place in 2015. The BoT will establish a CPI range of plus/minus 1.5% around a target of 3.0%. The main reason for this change is to enhance communication since the public is more familiar with headline inflation targeting rather than core inflation targeting. However, this is also seen as a more dovish stance for the BoT, as the range shift will put current headline inflation on the lower threshold of the bound, thus providing a reason for the Bank to keep interest rates low.

FocusEconomics Consensus Forecast panelists expect the one-day repurchase rate to end 2015 at 2.12%. In 2016, the panel expects the monetary policy rate to end the year at 2.50%.

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Thailand Monetary Policy Chart

Thailand Monetary Policy December 2014

Note: One-day repurchase rate, in %.
Source: Bank of Thailand (BoT).

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