Thailand: Bank of Thailand stays put in May
May 24, 2017
At its 24 May 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. The decision was in line with market expectations.
The Bank of Thailand had a more positive assessment of the economy at this month’s meeting. This view is in line with recently released GDP figures showing an acceleration in Q1 on the back of strong exports and tourism revenue, and more favorable weather conditions fueling farming income and supporting household expenditure. However, despite the improved economic panorama, inflationary pressures are still moderate, with lower inflation in April due to an ample harvest prompting food prices to fall. Inflation now stands substantially below the Central Bank’s 1.0%-4.0% target band for this year. As a result, the Bank decided against raising rates at this month’s meeting, in a bid to help inflation return to target.
The BoT is likely to keep rates on hold for the rest of the year. Economic activity will continue to grow at a broadly steady pace and inflation is expected to rise when the temporary effects on lower food prices fade, while remaining moderate. As a result, the Bank shouldn’t feel the need to loosen or tighten its monetary stance. The next monetary policy meeting will be held on 5 July.