The Bank of Thailand kept its benchmark interest rate unchanged for a ninth straight meeting on Wednesday, opting for stability as global financial markets brace for the outcome of the UK’s referendum on whether to exit the European Union.
The central bank held its one-day bond repurchase rate at 1.5%, with Monetary Policy Committee members voting unanimously in favour, it said. All but one of the 22 economists surveyed by Bloomberg News predicted the decision, with UBS AG forecasting a 25 basis-point cut.
"The economy would continue to recover, and inflation would return to the target band within the latter half of the year as previously expected," the MPC said in a statement.
"Meanwhile, monetary conditions remained accommodative and conducive to the economic recovery. Hence, the policy rate should be kept on hold at this meeting."
The BoT also maintained its 2016 economic growth forecast of 3.1%, as set three months ago. But it said exports this year will decline 2.5%, rather than fall 2%.
Last year's GDP growth was 2.8%. Exports, traditionally a growth driver, have declined the past three years.
Charnon Boonnuch, economist at Tisco Securities, said "We think the Thai economy is bottoming out, although headwinds will continue to drag."
The committee said government spending and tourism would continue to drive the economy while limited monetary policy space should be preserved given that "the Thai economy would still be facing risks going forward."
Tourism, accounting for 10% of GDP, has been a rare bright spot for the country.
Policy makers in the Southeast Asian nation have been reluctant to ease monetary policy despite inflation at close to zero and weak consumer spending, judging that lower interest rates would provide little support to an economy undermined by “structural” factors.
The prospect of heightened market turmoil if UK voters elect on Thursday to leave the European Union gives the BoT more reason to stay on hold for now.
“The central bank is likely to preserve its policy space and allow fiscal policies to take the lead,” Nalin Chutchotitham, an economist at HSBC Holdings, said before the decision. “There are also many global uncertainties including possible Brexit. Cutting rates at this time may send an overly-negative signal, hurt private sector confidence and induce more volatility.”
