Wednesday, November 4, 2015

Thailand maintains rate, policy to remain accommodative

     Thailand's central bank left its key policy rate steady at 1.50 percent and confirmed its view that its policy stance "should continue to be sufficiently accommodative" but stands ready to "utilize an appropriate mix of available policy tools in order to the support the economic recovery, while ensuring financial stability."
    The Bank of Thailand (BOT), which has cut its rate by 50 basis points this year, said its current policy stance and the exchange rate of the baht remain supportive of the economy despite the downside risks from the global economy, structural limitations and uncertain financial markets.
    The country's economy recovered "gradually" in the third quarter at a pace that was close to the BOT's expectation, with domestic demand improving while investment was also rising.
    At the same time, public spending also rose and additional fiscal stimulus should provide further support at a time that the Thai economy faces the negative fallout of a slowdown in China and other Asian economies.
    In the second quarter of this year the Thai Gross Domestic Product expanded by 0.40 percent from the first quarter for annual growth of 2.8 percent, down from 3.0 percent.
    Headline inflation remains negative due to the fall in global oil prices but the BOT still expects inflation to turn positive in the first quarter of next year.
    In October consumer price inflation improved to minus 0.77 percent from minus 1.07 percent in September, well below the target of 2.50 percent, plus/minus 1.5 percentage points.

 

    The Bank of Thailand issued the following statement:

"The Committee voted unanimously to maintain the policy rate at 1.50 percent.
Key considerations for policy deliberation are as follows.

In the third quarter of 2015, the Thai economy gradually recovered at a pace close to the assessment at the previous meeting. Domestic demand improved slightly on the back of increased spending on non-durable goods and services, as well as investment in certain business sectors. Meanwhile, public expenditure increased, and additional fiscal stimulus measures should provide some support to the recovery. However, the Thai economy faces more negative factors from abroad, particularly a slowdown in the Chinese and other Asian economies, which weigh down Thailand’s merchandise exports and investors’ confidence.

Inflationary pressure was stable from the previous meeting. Headline inflation continued to stay in negative territory due to a substantial fall in oil prices from last year. Nevertheless, headline inflation is projected to rise gradually, and to turn positive in the first quarter of next year. Meanwhile, deflationary risks remain contained as demand continues to expand and core inflation is still positive, consistent with medium-term inflation expectations of the public.

Under the Committee’s assessment, monetary conditions and exchange rate remain supportive to the economic recovery, despite the Thai economy continuing to face downside risks, especially from the global economy, structural limitations and uncertainty in the global financial markets. Against this backdrop, the Committee deemed maintaining the policy rate as appropriate at this meeting.

Looking ahead, monetary policy stance should continue to be sufficiently accommodative. The Committee will closely monitor global financial market developments as well as the impacts of fiscal stimulus measures on the economic recovery. The Committee stands ready to utilize an appropriate mix of available policy tools in order to support the economic recovery, while ensuring financial stability. "

    www.CentralBankNews.info


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