Central bank holds key rate, cuts 2019 growth, export outlook
published : 26 Jun 2019 at 14:24
updated: 26 Jun 2019 at 15:44
writer: Reuters and Bloomberg
Thailand's central bank held its benchmark interest rate steady for a fourth straight meeting on Wednesday, as widely expected, while cutting its forecast for economic growth and predicting no increase in exports this year.
The Bank of Thailand's (BoT) monetary policy committee voted unanimously to hold the one-day repurchase rate at 1.75%.
In a Reuters poll, 14 out of 15 economists had predicted no change to policy while the other forecast a quarter-point cut.
The BoT now expects 2019 economic growth of 3.3%, rather than the 3.8% seen three months ago. It predicts exports will be flat, compared with a 3.0% increase seen earlier.
In 2018, the economy expanded 4.1%, the highest rate in six years.
After delivering its first hike since 2011 in December, the BoT has kept its key interest rate unchanged, concerned by still-high household debt and financial stability risks.
Titanun Mallikamas, monetary policy committee secretary, said the central bank's policy stance "is neutral and will be data dependent going forward".
Pressure is growing on policy makers to ease as growth weakens. Exports in the trade-reliant economy fell in May, while manufacturing and tourism also contracted. Economic growth of 2.8% in the first quarter was the slowest since 2014.
The baht’s appreciation is also undermining growth. It gained 2.5% against the dollar in the past three months, the most among emerging markets tracked by Bloomberg.
Mr Titanun said the central bank will tighten its management mechanism of the baht and has already "taken care" of the baht to some extent.
The central bank has instruments ready to handle the baht' strength, which may be introduced "before long", he said.
Inflation remains benign and has stayed within the BoT's 1%-4% target range since March. The Commerce Ministry has said price growth may accelerate in the second half. The central bank forecast headline inflation of 1.0% this year, identical with its March projection.
Regional central banks from India to New Zealand have cut interest rates in recent weeks to boost their economies amid an escalating US-China trade war.
Deputy Prime Minister Somkid Jatusripitak said hours before the rate decision that the BoT will soon need to cut rates as “it can’t go against the trend” if the economy continues to weaken.