Bank of Thailand leaves rate at record low, warns of Covid risk

Bank of Thailand leaves rate at record low, warns of Covid risk

The Monetary Policy Committee has decided to keep its policy interest rate unchanged to support economic activities amid the third wave of Covid-19. (Bangkok Post photo)
The Monetary Policy Committee has decided to keep its policy interest rate unchanged to support economic activities amid the third wave of Covid-19. (Bangkok Post photo)

The central bank left its key interest rate unchanged at a record low of 0.50% on Wednesday, as expected, preserving its limited ammunition as the economy struggles with a third wave of coronavirus infections.

The latest outbreak has slowed domestic activity for the tourism-reliant economy at a time when it was preparing to reopen to travellers, but increased exports, another key growth driver, have lent some support.

The Bank of Thailand's (BoT) Monetary Policy Committee voted unanimously to keep the one-day repurchase rate unchanged for an eighth straight meeting.

All 14 economists in a Reuters poll had expected the BoT to remain on hold after three rate reductions in the first half of 2020 to ease the impact of the pandemic on the economy that suffered its deepest slump in over two decades.

"Economic growth is likely to sharply slow due to the third Covid-19 wave," the central bank said in a statement.

Monetary policy will remain accommodative to support economic activity, the BoT said.

The bank reiterated that the limited policy room should be preserved to be used at the most effective time.

The third Covid-19 wave, spurred by the highly transmissible B.1.1.7 variant, has accounted for more than half of total cases since the start of the pandemic. The outbreak came as Thailand prepared to reopen more broadly to foreign tourists and global vaccine rollouts paved the way for air travel to pick up.

The BoT said the number of foreign tourists would be less than the 3 million projected three months ago. That compares with nearly 40 million in 2019, before the pandemic.

Last week, the finance ministry cut its 2021 GDP growth outlook to 2.3% from 2.8% but raised its export growth forecast to 11% from 6.2% seen earlier.

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