The Bank of Thailand on Wednesday maintained its current policy rate while hinting at prioritising growth amid several weaker-than-expected economic indicators.
The seven-member Monetary Policy Committee (MPC) voted unanimously to keep the policy rate on hold at 1.75%.
"For the short-term cycle over the next two years we will trade off between growth and [financial] stability," said Titanun Mallikamas, secretary of the MPC. "The central bank has already implemented several instruments to supervise financial stability."
While financial stability remains sound overall, there is still a need to monitor risks that could pose threats to stability in the future, the MPC said in a written statement.
The committee plans to monitor rising household debt driven by auto-related loans, growth in assets held by savings cooperatives and the intermingling of savings cooperatives, adjustments in the real estate sector after the implementation of revised loan-to-value (LTV) limits, and leveraging by large companies that could underprice risks.
"In the upcoming period, there remains a need to address financial stability risks through a combination of tools, including the appropriate policy interest rate, as well as microprudential and macroprudential measures that would need to place greater emphasis on the debt servicing ability of borrowers," the MPC said.
The rate-setters assessed that the economy will expand at a slower pace than the forecast of 3.8%, largely due to weaker-than-expected merchandise exports and private investment.
Since the US Federal Reserve's announcement that it does not plan any hikes this year, several central banks have adopted a more dovish bias.
Malaysia's central bank earlier this week became the first in Southeast Asia to cut its key interest rate this year, moving to support its economy at a time of concern about global growth.
Mr Titanun said the MPC will closely monitor trade talks between the US and China and developments in the next government's formation, which could have impacts on economic policies and the 2020 fiscal budget.
Wednesday's MPC statement suggests that the central bank is increasingly focused on growth, Noelan Arbis, an economist at HSBC, said in a research note.
"The MPC said Thailand's economy is set to expand at an even slower pace than previously expected, suggesting that the central bank may expect growth to be below 3.8%, which was its downwardly revised forecast at its March policy meeting," Mr Arbis said.
There is also continued deterioration in the external environment, with yearly export and import growth both contracting in the first three months for the first time since 2016, he said.
There is a risk of these indicators declining even further in the quarters ahead, given weakness in vehicles and semiconductor sectors worldwide, despite stable US and China growth and rising trade uncertainties, Mr Arbis said.
HSBC expects GDP growth of 3.5% this year, factoring in domestic and external risks.
The benchmark rate is likely to stay unchanged throughout 2019, Mr Arbis said.