Thailand kept its key interest rate unchanged on Wednesday, pausing after a cut last month as the central bank assessed the impact of the reduction and a political deadlock on the economy.
The Bank of Thailand held its one-day bond repurchase rate at 2%, with monetary policy committee members voting six- to-one in favour of the decision, it said in Bangkok. Eighteen of 19 economists in a Bloomberg News survey predicted the move, with one expecting a quarter percentage point cut.
The government and the World Bank have cut Thailand’s growth forecasts for 2014 as unrest that began late-October to unseat Prime Minister Yingluck Shinawatra persisted. Governor Prasarn Trairatvorakul said earlier this month monetary policy is not “magic medicine” that can cure all problems and that the central bank needs to be careful about cutting rates.
“More rate cuts can’t help boost the economy as local demand is weighted down by the ongoing political problems,” Benjarong Suwankiri, an economist at TMB Bank Pcl in Bangkok, said before the decision. “It would be better for the central bank to save its bullet and use it when it is really necessary,” he said, adding that TMB predicts the rate will be held for the rest of the year.
The SET Index has slipped almost 3% in the past six months. The baht has weakened almost 4% against the US dollar in the same period, among the biggest losers of Asia’s 11 most traded currencies tracked by Bloomberg.
The central bank last month cut its key rate to the lowest since Dec 2010, and reduced its growth estimate for the year to 2.7% from 3%. Prasarn earlier said the monetary authority will review its forecast in June, as the fiscal budget that is scheduled to start in October may be delayed.
The political deadlock has crippled almost all the country’s main economic drivers. The private consumption index and private investment index have both contracted since the third quarter of last year. Tourist arrivals fell 8.1 percent in February from a year earlier, and Thai Airways International Pcl said this week it will miss its first-quarter profit estimate.