Thailand: Bank of Thailand leaves policy rate unchanged in November
November 8, 2017
At its 8 November monetary policy meeting, the Bank of Thailand (BoT) unanimously voted to uphold the one-day repurchase rate at 1.50%, where it has been for over two years. The decision met market expectations and was taken in light of subdued inflation, despite improvements to the outlook for the Thai economy.
As in the previous monetary policy meeting, the decision-makers noted the economy’s increased traction on the back of robust external demand and a vibrant tourism sector. The domestic economy also continued to show signs of improvement as private consumption and investment expanded; private investment expanded primarily in the machinery and equipment sectors. The Bank noted, however, that there are still pockets of risks in the domestic economy. The impact of July’s restrictive regulations on migrant workers could dent economic performance as the unemployment rate continues to hover around one percent. In addition, uncertainties relating to economic and foreign trade policies in the U.S., as well as geopolitical risks, could drag on export growth, affecting the overall performance of the Thai economy.
Inflation rose slightly from the outset of Q2 because of higher prices for basic goods, such as fresh food and energy, but the Bank noted that inflationary pressures stemming from domestic demand remained low. Inflation remained below the Bank’s target range of 1.0%–4.0% in October, coming in at 0.9%. It is expected to increase slowly as domestic demand recovers in combination with a hike in excise tax and the regulations on migrant workers, which could influence wages.
The Bank of Thailand stuck to a neutral tone in its communiqué, largely unchanged from September’s meeting. It is not expected that the current accommodative stance will change before year-end to keep the positive momentum afloat and aid in the recovery of domestic demand to bring up inflation.
The next monetary policy meeting will be held on 20 December.
Author: Jan Lammersen, Economist