Thailand's central bank held its policy rate steady at 2.5 percent, as expected, saying the Thai economy was stabilizing and should gradually recover, and the current accommodative policy stance should support "economic recovery in the periods ahead, given uncertain global economic and financial conditions."
The Bank of Thailand (BOT), which cut its rate by 25 basis points in May amid growing economic risks and a rise in the baht currency, said its monetary policy committee had voted unanimously to maintain the policy rate. Last month one committee member had voted to cut the rate and at today's meeting one member was absent.
The BOT said the economy had expanded more slowly than previously assessed but there have been signs of improvement in some sectors and exports have begun to recover in line with better global demand while private consumption and investment have stabilised.
"The outlook points towards a gradual growth recovery, supported by accommodative financial conditions," the bank said, adding that key downside risks stem from the uncertain global economy and a delay in fiscal disbursement for infrastructure projects.
Thailand's Gross Domestic Product contracted by 0.3 percent in the second quarter from the first, the second quarterly contraction in a row, for annual growth of 2.8 percent, down from 5.4 percent in the first quarter.
Thailand's inflation rate eased to 1.42 percent in September from 1.59 percent in August while core inflation was 0.61 percent, in the low end of the BOT's core inflation target of 0.5 to 3.0 percent.
The BOT also mentioned that household debt had decelerated somewhat and inflation had edged lower due to subdued production costs and domestic demand.
The BOT noted the downside risks to the global economy with the U.S. expanding at a moderate pace on the back of private consumption. But while the impact of the U.S. government shutdown should be limited, "failure to lift the debt ceiling poses a substantial risk to global financial and economic stability."
"The region remained exposed to global market volatility amid uncertainties about the timing of QE tapering and the US fiscal impasse," the BOT added.
The BOT did not make any references to the Thai baht, which has been largely steady since mid-September, trading at 31.25 to the U.S. dollar today, down 2.0 percent for the year.
From the start of the year to late April the baht rose by almost 6 percent, hitting a high of 28.6 baht to the dollar on April 26. But it started to depreciate after Thai authorities voiced their concern over the impact of the strong bath on exports and continued to drop following May's rate cut.