Thailand: Bank of Thailand stands pat in December, leaving monetary policy rate unchanged
December 20, 2017
At its 20 December monetary policy meeting, the Bank of Thailand (BoT) unanimously voted to maintain the one-day repurchase rate at 1.50%, where it has been for over two years. The decision, which met market expectations, was taken in light of a gradual recovery in domestic demand and subdued inflation.
The committee again noted traction in the Thai economy, driven by a strong external sector and booming tourism sector. According to third-quarter figures, the domestic economy continued to show signs of a gradual recovery, but private consumption remained subdued: Households are burdened by high levels of debt, which drags on private consumption. Private fixed investment picked up again in Q3 from Q2, thanks to investment in machinery and equipment. However, the Bank also noted that there are pockets of risk in the financial sector that could lead to the build-up of vulnerabilities in the financial system. The committee, moreover, noted lingering risks in the uncertainties related to the United States’ economic and foreign trade policies, as well as global geopolitical risks. These uncertainties could drag on export growth and affect the economy’s overall performance.
Rising energy prices drove inflation up somewhat, but inflationary pressures from domestic demand remained relatively low. Inflation reached the Bank’s target range of 1.0%–4.0% in November, coming in at 1.0%. A continuation in the recovery of domestic demand is expected to anchor inflation further in the target range.
The BoT struck a neutral tone in its communiqué, which was mainly unchanged from the meeting in November. It is not expected that the current accommodative stance will change in the next few months: The majority of FocusEconomics Consensus Forecasts panelists expect the one-day repurchase rate to remain unchanged throughout H1 2018, with some expecting a tightening in Q3 2018.
The next monetary policy meeting will be held on 14 February 2018.
Author: Jan Lammersen, Economist