Thailand Monetary Policy


Bank of Thailand keeps one-day repurchase rate unchanged

At its 5 November monetary policy meeting, the Bank of Thailand (BoT) decided to maintain the one-day repurchase rate at 2.00% as the markets had expected. Only one member of the six-member Committee voted in favor of cutting the rate by 25 basis points. The decision was on par with market expectations. The one-day repurchase rate currently sits at the lowest level in almost four years. The next monetary policy meeting is scheduled for 17 December.

The Bank acknowledged that the Thai economy is expected to grow less than expected in the third quarter amid a slow recovery in domestic demand. This, in turn, comes as a consequence of public spending being lower than expected. Looking forward to next year, the economy is foreseen gaining momentum due to a recovery in exports and public investments. Regarding prices, the BoT added that, “inflation declined owing to lower commodity prices and subdued demand-side pressure.”

The Monetary Policy Committee is discussing a possible shift in the monetary policy target from core inflation to headline CPI inflation. If the Committee approves the change—a decision is expected soon—the shift 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 reason for the Bank to keep interest rates low.

FocusEconomics Consensus Forecast panelists expect the one-day repurchase rate to end 2014 at 1.93%. In 2015, the panel expects the monetary policy rate to end the year at 2.33%.

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Thailand Monetary Policy Chart

Thailand Monetary Policy November 2014 0

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

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