Subdued inflation is not pressuring the Bank of Thailand to raise its policy rate and the country's buffers are strong enough to provide policy space to support growth, says governor Veerathai Santiprabhob.
Monetary policy is being conducted to facilitate the domestic economy, Mr Veerathai said, and the buffers afford the Bank of Thailand greater independence in carrying out monetary policy, as other emerging markets tend to follow in the footsteps of advanced economies.
The cushions include high foreign reserves of 3.5 times the country's short-term foreign debt, low foreign investor holdings in Thai bonds at 10% and the continued current account surplus, the governor said, adding that Thailand's current account is expected to run a surplus of 40 billion baht this year, representing 8-9% of GDP.
Headline inflation remains low and has just entered the lower end of the central bank's target range of 1-4% over the past few months, Mr Veerathai said.
The Monetary Policy Committee (MPC) on Wednesday voted 5 to 1 to stand pat on the policy rate at 1.5%, where it has remained since a 25-basis-point cut in April 2015.
The panel said the accommodative stance would support the country's economic recovery, which remains uneven in some sectors and has yet to reach low-income earners and farmers in particular.
The 1.5% level is lower than the US Federal Reserve's key rate of 1.75-2%.
One MPC member voted to raise the policy rate by a quarter percentage point to 1.75%, arguing that the economic expansion was sufficiently robust and the implementation of monetary accommodation for an extended period might induce households and businesses to underestimate potential changes in financial conditions.
Thailand is among the few countries still shrugging off normalisation of monetary policy, though some Asean central banks have already synchronised their monetary policies with the Fed's.
The combination of a trade spat between the US and China, the slightly hawkish view of the Fed and the European Central Bank's decision to end its asset purchases by year-end has triggered foreigners' sell-off in Thailand and other emerging markets.
The baht, which was the best-performing currency in Asia last year, further weakened against the greenback Thursday, slipping to 32.92 from 32.78 on Wednesday.
Amid robust economic growth in the first quarter of 4.8% year-on-year, more economists are predicting that the MPC will raise the benchmark rate in 2018 for the first time in several years.
Mr Veerathai said the baht's movement is still in line with other regional currencies that reflect similar economic fundamentals.
Regarding the ongoing trade hostility between the US and several countries, he described it as a risk that warrants monitoring, particularly for the electronics industry, in which Thai operators make up a significant part of the global supply chain.
On the other hand, the trade war presents business opportunities for some operators, Mr Veerathai said.