BoT holds key rate, cuts 2019 growth, export forecasts
published : 20 Mar 2019 at 14:30
The central bank held its benchmark interest rate steady for a second straight meeting on Wednesday as expected, and cut its forecasts for economic growth and exports this year.
The central bank cut its forecasts for 2019 economic growth and exports for the second time in three months on Wednesday, but kept its benchmark interest rate unchanged, saying domestic demand is picking up some of the slack.
The Bank of Thailand (BoT), as expected, left the one-day repurchase rate steady at 1.75% for a second straight meeting.
All 19 economists polled by Reuters had predicted no change to policy on Wednesday.
"Despite a slight downward revision to economic projection, the Thai economy as a whole was expected to continue expanding around its potential on the back of domestic demand," the bank's monetary policy committee (MPC) said in a statement.
"The committee viewed that the current accommodative monetary policy stance would remain appropriate," the committee said after a unanimous vote.
The MPC voted 4-2 to hold the rate at its February review, after hiking it by 25 basis points in December for the first time in more than seven years.
Central banks across much of trade-reliant Asia are cutting their economic growth and export outlooks due to concerns over cooling global demand and disruptions from the year-long US-China trade war.
The BoT cut its 2019 growth forecast for a second time in three months to 3.8% from 4.0% seen in December and 4.2% in September.
Exports, a key driver of economic growth, are expected to rise 3.0%, compared to a previous forecast of 3.8%.
The downgraded economic outlook and unanimous rate decision reflected a cautious view of downside risks to the economy, said Thammarat Kittisiripat, economist at KT Zmico Securities.
"The chance of a further rate hike this year is decreasing and will not happen soon, given low inflation and risks abroad and at home," he said.
Political uncertainty has been in focus as Thailand prepares to hold a general election on March 24, the first since a 2014 military coup.
Nomura said it maintained its below-consensus GDP growth forecast of 3.4% for 2019, which reflected rising external risks and post-election political uncertainty.
Kobsidthi Silpachai, head of capital markets research of Kasikornbank, said: "We don't have a hike pencilled in this year unless the outlook for inflation substantially changes ... which is dependent on the next government's policies."
The BoT said tourism continued to gain traction, but public spending, consumption and investment would grow at a slower pace, partly due to delays in some state-owned enterprise investment projects.
The bank maintained its 2019 headline inflation of 1.0%, below its target range of 1-4%.
It said the baht was still moving in line with regional currencies. The currency has appreciated by 2.6% this year, making it the best performing currency in Asia.