Thailand: Bank of Thailand stays put in March
March 29, 2017
At its 29 March monetary policy meeting, the Bank of Thailand (BoT) unanimously decided to keep the one-day repurchase rate at 1.50%, where it has been for nearly two years. This was in line with market expectations. The rate had been lowered to 1.50% in May 2015, following a period of subdued growth around the military coup in 2014.
Despite recent improvements in economic activity, the Bank of Thailand highlighted the persistent risks at the external front, such as a shift in global trade policies, political developments in Europe and financial instability in China, which could hurt the country’s important export sector. In order to resist potential headwinds from the external sector, the Bank decided to continue supporting the economy with relatively lax monetary conditions. However, the recent acceleration seen in exports prompted the BoT to upgrade its growth forecast for this year to 3.4% from 3.2% in December. Meanwhile, inflation climbed in January and February to almost two-year highs. Nonetheless, price pressures have been tamer than originally expected, largely due to oil prices rising less than anticipated. Against this backdrop, the BoT decreased its inflation forecast for this year from 1.5% to 1.2%.
For the rest of the year the BoT is expected to hold its fire. The economy should benefit from government spending, while higher tourism revenue and income from goods exported will feed through to households and support private consumption. But given the uncertainty in global political and monetary conditions as well as low inflationary pressures, steady rates are expected to be in store for Thailand this year.