The Bank of Thailand says it will maintain balance on growth and financial stability risks, implying that it could stand pat at the next policy rate call on July 10 after a 25-basis-point cut for the first time this year at the May 29 meeting.
Risks to financial stability incurred from the double-digit percentage growth in credit and rising household debt along with downside growth are chief concerns for the central bank, governor Prasarn Trairatvorakul said after giving a speech at the Foreign Correspondents Club of Thailand.
After the recent exodus of foreign investors from emerging and Asian markets on speculation that the US Federal Reserve will taper its stimulus, there has been hardly any talk about cutting interest rates, while the central bank's current one-day repurchase benchmark rate of 2.5% is not deemed high.
Moreover, the rising yield of 10-year government bonds to 3.7% from 3.5% also indicates the market's expectation that the rate will not be cut further, said Mr Prasarn.
Lower-than-expected first-quarter economic growth of 5.3% prompted the central bank to slash the policy rate at the May 29 meeting of the Monetary Policy Committee to cushion downside domestic consumption and investment.
The central bank also plans to lower this year's gross domestic product (GDP) growth forecast of 5.1%, with the revised figure to be announced on July 19.
Mr Prasarn said the medium-term trajectory of the Thai economy should remain intact, backed by solid economic fundamentals including high levels of employment, rising income and robust private sector confidence.
Fiscal policy on the infrastructure investment should also lend support.
The country's household debt at the end of last year surged to 78% of GDP from 63% at the end of 2010 and 44% as of March 31, 2003.
Mr Prasarn said of the 8 trillion baht in household debt, 3.8 trillion came from commercial banks and 2 trillion from state-owned banks such as the Government Housing Bank and the Bank for Agriculture and Agricultural Cooperatives, with about 1 trillion baht each from savings cooperatives and the rest from loan sharks.
"What I'm concerned about is that household debt is increasing at a fast clip," he said.
Mr Prasarn ruled out the need for the Bank of Thailand to follow Indonesia in raising interest rates to stem capital flight.
"Given the current situation, there is no need to raise rates like Indonesia did," he said, adding that Thailand is running a current account surplus, while Indonesia has a deficit.
Offshore investors' selling spree of Thai bonds and equities worth a combined 90 billion since May 23 weakened the baht beyond the 31-mark level last week, retreating from 28.55 to the US dollar, the strongest level in 16 years, in mid-April.