Central bank seen holding key rate again to aid growth

Central bank seen holding key rate again to aid growth

The central bank is expected to leave its policy interest rate near the record low again on Wednesday to encourage more broadly-based economic growth at a time inflation remains low.

All 21 economists in the poll predicted the Bank of Thailand (BoT)'s monetary policy committee (MPC), unlike some Asian central banks that have hiked this year, will keep its one-day repurchase rate at 1.50%.

The benchmark rate was been at that level since April 2015. Thailand's record low is 1.25%.

Growth in Southeast Asia's second-largest economy has picked up but remains uneven and heavily reliant on exports as domestic demand is soft.

On June 5, Governor Veerathai Santiprabhob said that "for now, an accommodative monetary policy stance would be maintained to foster a strong economic growth and facilitate the return of inflation to the target."

In May, annual headline inflation was 1.49%, the second month inside the BOT's 1-4% target after more than a year below it.

On Monday, Finance Minister Apisak Tantivorawong said he saw "no reasons" for Thailand to raise interest rates now, and that a weaker baht was good for the Thai economy.

The central bank on Wednesday is expected to raise its economic growth forecasts for this year and next, both currently 4.1%, following a stronger-than-expected performance in January-March.

Expansion in 2017 was 3.9%, the best in five years.

In May, when voting 6-0 to hold the policy rate, the MPC said there was growth momentum, but noted that domestic still was not sufficiently strong to sustain it.

In the Reuters poll, 11 of the 17 analysts who gave a longer-term view predicted no policy rate change for the rest of 2018, while six saw increases, starting from the third quarter.

Tim Leelahaphan, economist at Standard Chartered, who still predicts two quarter-point rate rises this year, said some MPC members might vote for a hike on Wednesday.

ANZ expects a 25 basis-point rate hike in the final quarter of 2018 and another one in 2019's first quarter.

For Thailand, "the conditions for policy normalisation are finally starting to come together", ANZ said, predicting gradual rate hikes, as it expects in Malaysia and South Korea.

The last time the BoT hiked its policy rate was August 2011, when the benchmark was raised a quarter-point to 3.50%.


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