Thailand: Bank of Thailand leaves policy rate unchanged in September
October 6, 2017
At its 27 September monetary policy meeting, the Bank of Thailand (BoT) voted unanimously to maintain the one-day repurchase rate at 1.50%, where it has been for over two years. The decision was in line with market expectations. Although policymakers noted the improved outlook for the Thai economy, subdued inflation led the Bank to decide to continue its accommodative monetary policy.
The Bank of Thailand found that economic growth was gaining more traction thanks to strong growth in merchandise exports and tourism. It stated that the recovery in domestic demand has become more broad-based, although household expenditure remained in a perilous state: Private consumption expanded on the back of services and durable goods so far this year but household purchasing power remained weak. Inflation is expected to rise slowly in the wake of a recovery in domestic demand, but lower fresh food prices due to increased output and favorable weather conditions reduced inflationary pressures. As a result, inflation remained below the Bank’s target range of 1.0%–4.0%, despite inching closer (September: 0.9%).
In terms of forward guidance, the Bank struct a neutral tone, relatively unchanged from the prior meeting. Hence it is unlikely that the current accommodative stance will change before year-end in order to continue to support economic expansion and the recovery of domestic demand, which should bring inflation to its target range.
The next monetary policy meeting will be held on 8 November.
Author: Jan Lammersen, Economist