Bank of Thailand holds key rate at record low as economy recovers
text size

Bank of Thailand holds key rate at record low as economy recovers

The Bank of Thailand (BoT) left its key interest rate unchanged at a record low again on Wednesday, as widely expected, to support the economy as the country tries to revive the vital tourism sector.

The BoT’s Monetary Policy Committee unanimously voted to hold the one-day repurchase rate at 0.50% for a 12th straight meeting, as expected by all 21 economists in a Reuters poll 

The rate was cut three times last year to alleviate the impact of the coronavirus pandemic.

"The Committee assessed that the Thai economy had bottomed out in the third quarter of 2021 and entered the recovery phase following the relaxation of containment measures and the re-opening of the country," the BoT said in a statement after its policy meeting.

However, the fragile economic recovery outlook would still be subject to uncertainties, it added.

The economy would expand at a pace close to the previous projection for 2021 and 2022 on the back of domestic spending that gradually recovered following the relaxation of containment measures, partially offsetting the adverse impact of higher global energy prices, the BoT said.

In September, the BoT forecast economic growth of 0.7% this year and 200,000 foreign tourists. Next year, it predicted 3.9% GDP growth and 6 million foreign arrivals.

In 2019, nearly 40 million foreign visitors spent 1.91 trillion baht.

“I don’t think today’s decision and statement moves the needle much on Bank of Thailand’s monetary policy outlook,” said Euben Paracuelles, economist at Nomura Holdings Inc in Singapore. “There is some discussion on inflation but BoT was clear underlying pressures are still low. This allows them to continue to focus on supporting the economic recovery.”

Nomura expects the Thai central bank to keep its policy rate unchanged throughout 2022 as the nation’s economic recovery may lag the broader region because of a slow rebound in tourism despite the reopening this month, Paracuelles said.  

The BoT said the baht was more volatile and it would closely monitor developments in both global and domestic financial markets and continue to work on improving the structural issues in the foreign exchange system.

The baht was little changed after the rate announcement, holding gains of 0.1% against the dollar and poised for a fourth straight day of advances. The currency has gained 1.3% so far this month. While the benchmark stock index pared losses in afternoon trading, the yield on 10-year government bonds rose two basis points to 1.883%.

The Bank of Thailand sees low probability of the US Federal Reserve raising rates faster than expected, but it stands ready to handle any impact on the nation’s currency, bond yields and capital flows, Assistant Governor Piti Disyatat told a briefing.  

The Monetary Policy Committee will revise economic forecasts at its next meeting on Dec 22, Mr Piti said. The panel may slightly raise its inflation forecasts, though the price gains are not significant enough to impact monetary policy, he said.

Do you like the content of this article?