Thailand holds rate but says economy in recovery phase

     Thailand's central bank once again left its key interest rate steady, as widely expected, but said the country's economy had now bottomed out in the third quarter and now "entered the recovery phase following the relaxation of containment measures and the re-opening of the country."
    The Bank of Thailand kept its policy rate at 0.50 percent, unchanged since the last cut in May 2020. 
     In response to slowing global growth in 2019, BOT began cutting its rate in August 2019 and then continued to cut last year due to the COVID-19 pandemic, with the rate cut a total of 5 times since 2019 and by a total of 1.25 percentage points.
     After an initial recovery from the first wave of the pandemic by the middle of last year, Thailand's economy was hit hard by a second and third wave this year, leading BOT to continuously lower its growth forecasts following the 6.1 percent contraction in 2020, the sharpest fall in 22 years.
    But the Thai economy is now showing signs of recovery and the bank's monetary policy committee voted unanimously for the second time to maintain the rate after two of its members in August had voted to cut it to support the economic recovery.
    In October Thailand's manufacturing sector expanded for the first time since April at the steepest pace in 2-1/2 years and confidence remained strong, according to the IHS Markit PMI, which rose to 50.9 from 48.9 in September.
     Although BOT said the rollout of vaccines had reduced the downside risks to the economy, BOT is conscious of the repeated set-backs earlier this year from the pandemic and described the recovery as "fragile" and subject to uncertainties while headline inflation will rise due to higher energy prices.
     It said the economy would expand close to its forecast of economic growth this year and in 2022 on the back of an rise in domestic spending following the relaxation of containment measures, which is partially offsetting the adverse impact of higher global energy prices.
      In its September monetary policy report, BOT lowered its forecast for economic growth this year to 0.7 percent from June's forecast of 1.8 percent but maintained the 2022 forecast of 3.9 percent. 
     Despite the hit to its important tourism sector from this year's pandemic waves, Thailand's gross domestic product unexpectedly grew an annual 0.4 percent in the second quarter of this year from 0.2 percent in the first quarter, helped by government stimulus and rising exports.
     Thailand's inflation rate has been rising in the last 2 months to 2.38 percent in October from 1.68 percent in September and BOT expects it to continue to rise temporarily due to higher energy prices and supply-side factors.
    However, it still expects inflation to remain within its target of 1.0 to 3.0 percent - with upside risks from elevated energy prices and supply constraints - as upward pressure from demand is subdued.

    BOT expects 1.0 percent headline inflation this year, after a 0.8 percent fall last year, and 1.4 percent inflation in 2022.

Thailand maintains rate and economic forecast

      Thailand's central bank left its key interest rate steady, saying targeted financial measures would be more effective than cutting an already-low policy rate and called on the government to expedite health measures to facilitate the recovery of economic activity and incomes.
      The Bank of Thailand's (BOT) monetary policy committee unanimously kept the policy rate at 0.50 percent, unchanged since the last cut in May 2020.

       Last month two members of the policy committee voted to lower the policy rate by 25 basis points, the first split decision since May 2020, with some analysts looking for a rate cut today.

      But since the August meeting, data showed Thailand's economy expanded by a higher-than-expected 0.4 percent in the second quarter from the first quarter for annual growth of 7.5 percent - the first expansion in six quarters and the strongest growth since fourth quarter of 2012.

      The government then raised the public debt ceiling this month to 70 percent of gross domestic product from 60 percent with the country's finance minister earlier today saying the government would borrow domestically for now and may then look abroad if the economy recovers.       

       In response to weakening global growth in 2019, BOT began lowering its rate in August 2019 and cut its rate twice that year by a total of 50 basis points. 
     As the COVID-19 pandemic swept the world in early 2020, BOT cut its rate another three times by 75 basis points from February through May with the rate now 1.25 percentage points below its level in August 2019.

      After climbing back from the first wave of the pandemic in mid-2020, Thailand's economy was hit hard by a second wave late last year and a third wave this year, forcing BOT to continuously reduce its forecast for economic growth after a 6.1 percent contraction in 2020, the sharpest fall in 22 years.

      Starting in June this year BOT slashed its 2021 growth outlook to 1.8 percent from 3.0 percent and then in August the forecast was cut to 0.7 percent while the finance ministry lowered its outlook to 1.3 percent from 2.3 percent expected in April.

      Today BOT said it expects the country's economy to expand close to its August forecast of 0.7 percent this year and 3.9 percent in 2022, noting "uncertainties surrounding the economic outlook remained high."

       Although Thailand's economy was affected by containment measures and a slowdown in exports in the third quarter, BOT said significant progress in vaccinations and earlier-than-expected relaxation of such measures would help restore private sector confidence and boost private consumption for the remainder of this year.

     "The economy is 2022 would recover mainly owing to domestic spending in tandem with improving confidence," BOT said, adding foreign tourists are expected to recover slowly while exports will continue to be affected by a shortage of shipping containers and semiconductors.

      Thailand's inflation rate has been decelerating in recent months and fell to 0.02 percent in August from 0.45 percent in July, with food prices down for the second month in a row.

Thailand holds rate 5th time, trims 2021 growth outlook

     Thailand's central bank left its policy rate steady for a fifth time and while it lowered its forecast for economic growth next year due to the resurgence of COVID-19 it once again expressed its concern over any "potential rapid" rise of the baht, adding it is willing to take further measures.

     The Bank of Thailand (BOT) kept its policy rate at 0.50 percent, unchanged since cutting it for the third time this year in May. 

      BOT cut its policy rate by a total of 75 basis points in February, March and May, continuing an easing cycle that began in August 2019 in response to slowing global growth from the U.S.-China trade war. 

     Since August last year the rate has been cut five times by a total of 125 basis points.

     As in November, BOT's monetary policy committee was unanimous in its decision - though one member could not attend the meeting - reiterating it was maintaining the rate to "preserve the limited policy space in order to act at the appropriate and most effective timing."

      The outbreak of COVID-19 in the spring hit Thailand's important tourism sector hard but private consumption and merchandise exports have recovered faster than expected and BOT lowered its forecast for the economy's contraction this year to 6.6 percent from September's forecast of 7.8 percent.

      Thailand's gross domestic product shrank 6.4 percent year-on-year in the third quarter of this year, down from a 12.1 percent fall in the second quarter but up from a 2 percent fall in the first quarter. 

      In 2019 the Thai economy grew 2.4 percent.

      "The Committee assessed that the Thai economy continued to recover but downside risks and uncertainties remained high in the period ahead," BOT said, adding the economy would thus need support from the continued low policy rate.

     In 2021 the economy is seen expanding 3.2 percent, less than the 3.6 percent that was previously forecast due to the prolonged outbreak of the pandemic and thus a delay in a recovery of tourism, with the number of visitors now seen at 5.5 million instead of 9.0 million, still sharply below 2019's 39.9 million.

     But with COVID-19 vaccinations now beginning to roll out, BOT expects tourism to become the key driver of economic growth in 2022, with the number of tourists rising to 23.0 million and exports growing 12.3 percent, boosting economic growth to 4.8 percent.

     The strength of the Thai baht has been a concern for its exporters for years and its rise since early April on optimism over the global economic recovery has triggered political protests.

      In its statement last month BOT not only expressed concern over what it said was a "rapid appreciation of the baht as this affected the fragile economic recovery," but also scheduled a briefing on measures to address the issue, leading to a fall in the baht's exchange rate.

       But instead of the briefing, BOT announced further measures to allow Thais to freely deposit and transfer funds in foreign currency deposit accounts and invest more in foreign securities, enabling exporters to more effectively manage liquidity and foreign exchange risks, along with intervened in the foreign exchange market to limit excessive volatility.

      Today, BOT changed its tone and instead of expressing its concern over the past rise in the baht it pointed to a "potential rapid appreciation of the baht owing to risk-on sentiment in financial markets and the weakening outlook of the US dollar."

      The bank's policy committee said it would closely monitor the foreign exchange market and consider "the necessity of implementing additional appropriate measures, as well as continue to expedite new foreign exchange ecosystem."

     After hitting a record low of more than 36 to the U.S. dollar in October 2015, the baht rose steadily until April 2018. But after rising for a few months, the baht continued its steady rise until the start of this year when it hit a popped above 30 to the dollar on Jan. 1.

     In the next three months it fell to 33 to the dollar but since the start of April it has risen steadily until last week when it once gain breached 30 to the dollar. Since then, however, the baht has eased slightly to trade at 30.2 to the dollar, today, up 9.3 percent since this year's low of 33.0 on April 2.

     The baht is thus ending the year some 0.7 percent below its level at the start of the year but up 20.5 percent since its recovery low in October 2015.

This week in monetary policy: China, Paraguay, Thailand, Turkey and Egypt

     This week - December 21 through December 26 - central banks from 5 countries or jurisdictions are scheduled to decide on monetary policy: China, Paraguay, Thailand, Turkey and Egypt.
    Following table includes the name of the country, the date of the next policy decision, the current policy rate, the local time a policy decision is announced, the result of the last policy decision, the change in the policy rate year to date, and the rate one year ago.
    The table is updated when the latest decisions are announced and can always be accessed by clicking on This Week.
 

WEEK 52
DEC 21 - DEC 26, 2020:
CHINA	21-Dec	3.85%		0	-30	4.15%	EM
PARAGUAY	21-Dec	0.75%		0	-325	4.00%
THAILAND	23-Dec	0.50%		0	-75	1.25%	EM
TURKEY	24-Dec	15.00%	14:00	475	300	12.00%	EM
EGYPT	24-Dec	8.25%		-50	-400	12.25%	EM

   

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Thailand cuts rate 3rd time as economy shrinks, deflation

     Thailand's central bank cut its policy rate for the third time this year, as expected, saying the economy in 2020 will shrink more than it had expected due to the contraction in the global economy while headline inflation will also be more negative than expected and financial stability more vulnerable.
     The Bank of Thailand cut its policy rate by another 25 basis points to 0.50 percent and has now cut it 75 points this year following cuts in February and March.
     Since August 2019, when it began easing in response to the U.S.-China trade war, BOT has cut its key interest rate by 125 basis points.
      Looking ahead, the bank's monetary policy committee (MPC) said it would monitor growth, inflation and financial stability along with associated risks and the COVID-19 outbreak, and stands ready to use additional monetary tools if necessary.
      BOT's MPC voted 4 to 3 for the rate cut, with most members expecting a more accommodative monetary policy to alleviate the negative impact from the coronavirus pandemic.
      But three members of the committee wanted to maintain the rate and instead focus on expediting the effectiveness of financing and credit measures already announced.
       As a whole, the committee agreed financial institutions should work to ensure that debt restructuring, particularly for households and small- and medium-sized businesses, be carried out on a wider scale and liquidity problems should be addressed in a targeted and timely manner.
      Thailand's economy shrank 2.2 percent in the first quarter of 2020 from the fourth quarter, the second consecutive contraction following a 0.2 percent contraction in the previous quarter.
     On an annual basis, gross domestic product shrank 1.8 percent after expanding 1.5 percent in the previous quarter, the country's worst downturn since the fourth quarter of 2011.
     Thailand's economic and social development council, which compiles the data, cut its 2020 GDP forecast to a contraction of 5.0 to 6.0 percent from an earlier forecast of growth of 1.5 to 2.5 percent.
     In March BOT forecast the economy would shrink 5.3 percent this year.
     In addition to rate cuts, BOT has also taken measures to help SME's and corporate bond markets while the government has announced stimulus of 1.9 trillion baht, some 10 percent of GDP, including 1 trillion in borrowing, fueling concern this would drain liquidity from Thai bond markets, one of the biggest local-currency bond markets in Southeast Asia.
     "The Thai economy would contract more than the previous assessment," BOT said.
      BOT said tourism and merchandise exports had been affected more than it had expected, and domestic demand would also contract more than expected due to higher unemployment.
      BOT also said headline inflation this year will be more negative than it had expected due to the fall in energy prices and core inflation will remain subdue at low levels.
      Thailand's consumer prices fell 2.99 percent in April, the biggest drop since July 2009, after a fall of 0.54 percent in March, well below BOT's target of 2.5 percent, plus/minus 1.5 percentage points.
      Thailand's baht, which rose steadily from October 2015 through the end of 2019, fell through the first three months but has risen since the start of April.
      In response to the strong baht, which has made Thai exports less competitive, BOT had loosed foreign exchange regulations to enable more capital outflows.
      Today BOT noted the baht had risen against the U.S. dollar and regional currencies and "expressed concern over the bath that could strengthen and affect the economic recovery," adding it was closely monitoring financial markets.
      The baht continued to firm after the rate cut, trading at 31.8 to the U.S. dollar, but remains 5.7 percent below its level at the start of this year.

Thailand cuts rate 25 bps as coronavirus dents growth

     Thailand's central bank cut its policy rate by 25 basis points to 1.0 percent as the economy is seen expanding "at a much lower rate in 2020 than the previous forecast and much further below its potential due to the coronavirus outbreak, the delayed enactment of the Annual Budget Expenditure Act, and the drought."
     It is Bank of Thailand's (BOT) third rate cut since August 2019 and reflects the sudden worsening of the prospects for its important tourism industry from restrictions on Chinese travelers, who account for about a quarter of all tourist arrivals, after the outbreak of the coronavirus.
     In addition, Thailand's export-dependent economy is still suffering from the U.S.-China trade war and the dampening effect of the strong baht while overall economic activity is affected by a delay in the government budget and agriculture is reeling from drought.
     "The (monetary policy) committee viewed that a more accommodative monetary policy stance would alleviate the negative impacts," BOT said, adding the rate cut should help with liquidity and debt restructuring for those businesses and households that are severely affected by the economic slowdown, with both measures "urgently implemented."
     "Consequently, the Committee would continue to monitor the downside risks from the coronavirus outbreak, the delay budget disbursement, and the drought that could be more severe than previously assessed, together with trade tensions and geopolitical risks that remained highly uncertain," BOT said in a downbeat outlook.
     In December BOT lowered its forecast for 2020 economic growth to 2.8 percent economic growth from an earlier 3.3 percent and in late January it flagged this forecast would be lowered.
     Today it said growth this year would be "much further below its potential."
     Tourist arrivals are expected to be much lower than forecast, exports "would declined in line with trading partner economies and potential impacts of regional supply chain disruptions" while drought is affecting a large number of related businesses and employment.
    Public spending will also grow at a lower rate than expected, affecting domestic demand while private consumption is still held back by moderating household income in the services, agricultural and manufacturing sectors as well as by elevated household debt.
     In late January BOT also said growth in the fourth quarter of 2019 would also be lower than third quarter's annual rate of 2.4 percent and estimated 2019 growth of 2.5 percent would be missed.
     BOT is clearly concerned the economic slowdown is making the financial system more vulnerable, especially with regard to debt servicing, and said loans to businesses have decelerated in tandem with the economic outlook so there is "an urgent need to coordinate monetary and fiscal measures" to ensure financial stability.
     Thailand's inflation rate has been below BOT's target of 2.5 percent, plus/minus 1.5 percentage points, since June 2019 and today it said inflation would be below its lower bound throughout the forecast horizon due to subdued demand and lower energy prices from a drop in oil demand due to the coronavirus outbreak.
     Drought, however, is expected to push up food prices and in December Thailand's inflation rate rose to 0.87 percent from 0.21 percent in November.
     On Feb. 17 Thailand's planning agency is due to release new economic data.
     A steady appreciation of Thailand's baht since October 2015 has made its exports less competitive  and BOT has loosened foreign exchange regulations to enable more capital outflows.
     BOT said today the baht had depreciated somewhat compared with trading partner currencies but "might not be consistent with economic fundamentals and would likely remain volatile."
     Reversing some its rise, the baht has dropped this year but then rose in response to the rate cut to trade at 30.99 to the U.S. dollar, down 3.2 percent this year but still up 4.9 percent since the start of 2019.

Thailand holds rate, outlook for exports, growth improves

     Thailand's central bank left its policy rate steady at 1.25 percent, saying the outlook for the global economy had begun to stabilize and this would result in "an improving outlook for Thai exports and economic growth next year" even if growth will be lower than expected.
     The Bank of Thailand (BOT), which has cut its rate twice this year by a total of 50 basis points, said its monetary policy committee unanimously had decided to maintain the rate and "would assess risks to the economic outlook in deliberating appropriate monetary policy going forward."
     BOT's monetary policy committee was split 5-2 in its decisions to cut the rate in August and November.
     Thailand's economy slowed sharply in the first and second quarters of this year as its exports were hit by the global slowdown and BOT has acknowledged growth this year will be lower than its most recent forecast of 2.8 percent.
     Later media reported BOT lowered its 2019 growth forecast to 2.5 percent and the 2020 forecast to 2.8 percent from an earlier 3.3 percent, and the 2019 inflation forecast to 0.7 percent from 0.8 percent and the 2020 forecast to 0.8 percent from 1.0 percent.
      After falling to annual growth of 2.3 percent in the second quarter, growth picked up marginally to 2.4 percent in the third quarter but BOT said exports had contracted more than expected and were projected to recover more slowly than expected due to the slowdown in global trade from trade tensions along with structural changes in the manufacturing sector on export competitiveness.
     BOT said tourism is expected to continue to grow but domestic demand, public spending and private investment would expand less than forecast, partly due to delays in some state-owned investment projects and some public-private infrastructure projects.
     Private consumption is also expected to decelerate due to lower household income and employment, particularly in export-related manufacturing sectors.
     Thailand's exports have become less competitive in recent years as the baht has risen steadily since hitting a low of around 36.5 in  October 2015, with the rise in the baht driven up by the country's current account surplus and foreign fund inflows.
      Although the baht has stabilized in recent weeks, the baht has appreciated by 7.6 percent this year and was trading at 30.24 to the U.S. dollar today.
     "The Committee expressed concerns over baht appreciation against trading partner currencies, and thus saw a need to continue to closely monitor exchange rates and capital flows amid elevated external uncertainties," BOT said, adding it would also monitor the impact of the latest relaxation of foreign exchange control regulations in November aimed at encouraging capital inflows.
     Thailand's inflation rate rose slightly to 0.21 percent in November from 0.11 percent in October but is well below BOT's target of 2.5 percent, plus/minus 1.5 percentage points and BOT expects inflation to remain below its lower bound in 2020.

Thailand cuts rate 2nd time to boost growth, inflation

     Thailand's central bank cut its policy rate for the second time in four months, saying economic growth is slowing more than expected as a decline in exports is affecting domestic demand and employment while inflation is below the lower bound of its target.
     The Bank of Thailand (BOT) cut its policy rate by another 25 basis points to 1.25 percent and has now cut it by 50 points this year, catching up with the easing by some of the other emerging market central banks in Asia, such as Indonesia (4 rate cuts), the Philippines (3 rate cuts) and South Korea (2 rate cuts).
     The last time BOT's policy rate was lowered to this level was in April 2009 during the global financial crises and it remained at that level until July 2010.
     Mirroring the decision in August, when BOT cut its rate for the first time since April 2015, the policy committee was split, with five members voting to cut while two voted to maintain the rate, arguing the monetary policy stance is already accommodative and policy space should be preserved to cope with any potential risks in the future.
    "Most members viewed that a more accommodative monetary policy stance would contribute to economic growth and support the rise of headline inflation toward the target," BOT said, adding the country is facing higher external risks from trade tensions, the economic outlook of China and advanced economies, which could affect domestic demand, as well as geopolitical risks.

     As in September, when BOT maintained its rate, the bank's monetary policy committee said it would remain data-dependent going forward but the Thai economy continues to face structural problems that will affect its competitiveness and economic growth.

     In September, BOT also said growth was lower than previously assessed and below potential and cut its 2019 growth forecast to 2.8 percent from 3.3 percent and the 2020 forecast to 3.3 percent from 3.7 percent due to weak exports.
     Last week BOT said third-quarter growth might be less than its 2.9 percent forecast. In the second quarter the economy slowed to 2.3 percent annual growth from 2.8 percent in the first quarter, continuing the deceleration since 5.0 percent growth in the first quarter of 2018.
     Thailand's government in August launched a 310 billion baht stimulus package, comprised of cash handouts and cash rebates, and government officials have said they may launch additional stimulus to boost the economy.
     Compounding sluggish global demand for its exports, the baht is strong and BOT "expressed concerns over the baht appreciation against trading partners countries."
     The baht, driven up by the country's current account surplus and foreign fund inflows, has trended upwards since October 2015 and is up 7.33 percent this year to 30.28 to the U.S. dollar although it has slipped this month.
     BOT said it supported a relaxation of foreign exchange regulations to encourage capital outflows and promote more balanced capital flows which should alleviate pressure on the baht and help the private sector better manage exchange rate risks.
     Thailand's inflation rate fell to 0.11 percent in October from 0.32 percent in September and well below BOT's target range of 2.5 percent, plus/minus 1.5 percentage points on lower-than-expected energy prices and the global slowdown.
      In September BOT cut its inflation forecast for 2019 to 0.8 percent from 1.0 percent but retained the 2020 forecast at 1.0 percent.
     BOT has proposed narrowing the inflation target for next year and the finance ministry has agreed with the new target, as yet unknown, and said this week it was submitting it for cabinet approval.

Thailand cuts rate 25 bps to boost growth, inflation

     Thailand's central bank surprisingly cut its policy rate by 25 basis points to 1.50 percent to boost economic growth, which is expected to be slower than expected due to a decline in exports, and support the rise of inflation, which is projected to be below the lower bound of the target range.
      It is the first rate cut by the Bank of Thailand (BOT) since April 2015 and reverses the bank's interest rate hike in December last year that was carried out to help build more room for easier policy in the event of a economic slowdown and also curb the risks of financial instability.
     BOT's monetary policy committee voted 5-2 to lower the policy rate, with 2 members voting to maintain the rate, arguing for the need to preserve policy space.
     In its statement, the policy committee said the Thai economy is expected to "expand at a lower rate than previously assessed due to a contraction in merchandise exports, which started to affect domestic demand."
     In June BOT cut its 2019 economic growth forecast to 3.3 percent from an earlier 3.8 percent compared with 2018 growth of 4.1 percent.
     "Inflation was projected to be lower than the lower bound of the inflation target," BOT said, as energy prices had declined at a fast pace while core inflation is expected to ease due to "subdued demand-pull inflationary pressures."
      Structural changes, such as an expansion of e-commerce, rising price competitions and technological developments that lowers the cost of production, is also curbing inflation, BOT said.
     Thailand's inflation rate rose to 0.98 percent in July from 0.87 percent in June and the BOT had earlier expected inflation to return to its target range of 1.0 to 4.0 percent this year.    
    "The Committee would monitor external risks from intensifying trade tensions, the economic outlook of China and advanced economies that could affect domestic demand, as well as geopolitical risks," BOT said.

UPDATE-Thailand maintains rate, lowers growth forecast slightly

     (Following report was updated with Bank of Thailand's forecasts)    
     Thailand's central bank kept its policy rate steady at 1.75 percent, as expected, saying it expects the country's economy to grow slightly slower than expected but it will still expand around its potential level as domestic demand will improve while slower global growth will dent exports.
     The Bank of Thailand (BOT), which raised its rate in December 2018 for the first time since August 2011, said overall financial conditions remain accommodative and conducive to economic growth while domestic consumption will continue to expand and inflation is in line with expectations.
     Last month BOT also left its rate on hold although two members of the monetary policy committee voted to raise the rate again by 25 basis points to curb risks to financial stability and create more policy space for the central bank to ease in the event of an economic downturn.
     Today's policy decision was unanimous.
     In today's statement, BOT said there were still risks to financial stability in the future that warrant continued monitoring but recent macro prudential measures and the higher policy rate would help curb the build-up of vulnerabilities in the financial system from the search for yield in a low interest rate environment that might lead to an underpricing of risks.
     Looking ahead, BOT said the "current accommodative monetary policy stance would remain appropriate" and it would continue to monitor growth, inflation and financial risks in deciding the appropriate policy in the period ahead.
     "In addition, given heightened global and domestic uncertainties in the current period, the Committee thus voted to keep the policy rate unchanged at this meeting to assess the clarity of impacts from such uncertainties," BOT said.
     On March 24 Thailand will hold its first general election since a military coup in 2014 under a new constitution that essentially gives the military more sway over future governments.
     BOT cut its 2019 growth forecast to 3.8 percent from December's forecast of 4.0 percent and forecast growth in 2020 of 3.9 percent. The forecast for export growth this year was lowered to 3.0 percent from 3.8 percent.
      Last month BOT Governor Veerathai Santiprabhob said Thailand's economy was expected to slow in the current quarter but it was still on track to meet the 2019 forecast of 4.0 percent.
      In 2018 Thailand's export-dependent economy grew 4.1 percent, the fastest pace in 6 years, with annual growth of 3.7 percent in the fourth quarter, up from 3.2 percent in the third quarter.
     While private consumption is expected to continue to expand, BOT said exports had grown at a slower pace than previously expected due to the global economic slowdown, a down cycle of electronic products and impacts of the trade protectionism measures between the U.S. and China.
     Thailand's headline inflation rate rose to 0.73 percent in February from 0.27 percent in January, well below BOT's target of 1.0 to 4.0 percent.
      In its latest forecast, BOT maintained its forecast for headline inflation of 1.0 percent this year, slightly down from 1.1 percent in 2018, and forecasts 1.1 percent for 2020.
     After rising from November last year to mid-February, Thailand's baht dropped this month and BOT said the exchange rate "would likely remain volatile due to both domestic and external uncertainties."
     The baht was trading at 31.7 to the U.S. dollar today, up 2.5 percent this year.

Thailand raises rate 25 bps but policy to stay loose

     Thailand's central bank raised its policy rate by 25 basis points to 1.75 percent to "curb financial stability risks and to start building policy space," but signaled this was likely to be a one-off rate hike as it was still of the view that its monetary policy stance should remain accommodative.
     It is Bank of Thailand's (BOT) first change in rate since a rate cut in April 2015 and the first rate hike since August 2011.
     The rate hike was largely expected and comes after 3 of the monetary policy committee members in November voted to raise rates. Today, 5 of the 7 members voted for the hike while the other 2 members voted to maintain the rate, arguing external risks had risen and could threaten growth.
     "Most members (of the MPC) viewed that the policy rate at 1.75 percent would remain conducive to economic growth," BOT said, adding the committee viewed that "accommodative monetary policy would remain appropriate in the period ahead."
     The BOT said the Thai economy had continued to gain traction on the back of domestic demand while external demand was slowing but it was deemed necessary to monitor risks that might lead to the build-up of vulnerabilities in the financial system in the future.
     Headline and core inflation was projected to be broadly in line with earlier assessments.
     BOT has forecast economic growth this year of 4.4 percent and 4.2 percent in 2019 and headline inflation of 1.1 percent this year and 2019.
     Thailand's gross domestic product grew by lower-than-expected 3.3 percent year-on-year in the third quarter, down from 4.6 percent in the second quarter while headline inflation eased to 0.94 percent in November from 1.23 percent, just below its target range of 1.0 - 4.0 percent.
     After depreciating from April to August, the Thai baht has risen slightly since November and was trading at 32.7 to the U.S. dollar today, largely unchanged since the start of the year.

Thailand holds rate but 2 MPC members vote for hike

     Thailand's central bank maintained its policy rate at 1.50 percent, as expected, but took another step toward raising the rate by saying "the need for currently accommodative monetary policy would be gradually reduced."
      A second member of the Bank of Thailand's (BOT) 7-member monetary policy committee (MPC) also voted to raise the rate by 25 basis points, joining the one member that has voted three times this year to raise the rate.
     The BOT has maintained its rate since April 2015 and the last rate hike was in August 2011.
     The combination of strong economic growth, inflation that is slowly rising and a relatively strong showing by the Thai baht has led to expectations that BOT would raise its rate later this year.
     And last month BOT Governor Veerathai Santiprabhob acknowledged there was less need for an extremely accommodative policy and the country's couldn't go against the global trend of rising rates.
      "The Thai economy as a whole continued to gain traction, driven by merchandise exports and tourism which continued to improve in tandem with global economic growth, and by continued momentum from domestic demand," BOT said.
       In an update of its economic forecast, the BOT maintained its forecast for economic growth this year of 4.4 percent, up from 2017's 3.9 percent, and the 2019 forecast for 4.2 percent growth.
       In the second quarter Thailand's Gross Domestic Product grew by an annual 4.6 percent, down from 4.9 percent in the first quarter.
       Headline inflation is seen averaging 1.1 percent this year, unchanged from the central bank's June forecast, and 1.1 percent in 2019, down from 1.2 percent previously forecast.
       In 2017 inflation averaged 0.7 percent, below BOT's target range of 1 - 4 percent, and in August inflation rose to 1.62 percent from 1.46 percent in July.
       While the majority of the bank's MPC considered the current policy stance to be appropriate given the inflation target, two of its members view the economic expansion as sufficiently robust and prolonged monetary accommodation would induce businesses and households to underestimate the risk of higher rates and also allow the BOT to build policy space.
       As most other currencies, the baht depreciated against the U.S. dollar in the first half of this year but compared with other Asian currencies it has performed better and risen against the dollar since late July.
       As in August, the BOT said the baht "would likely remain volatile" and it would continued to "closely monitor exchange rate developments as well as impacts on the economy."
       The baht rose in response to today's policy statement and was trading at 32.44 to the dollar and is now up 0.6 percent since the start of this year.

Thailand holds rate as one MPC member votes to hike

      Thailand's' central bank left its policy rate steady at 1.50 percent but for the third time this year one member of the monetary policy committee (MPC) voted to raise the rate.
       The Bank of Thailand (BOT), which has maintained the rate since April 2015, reiterated that monetary policy should continue to remain accommodative and there was still a need to monitor the strength of domestic demand, inflation, financial stability, the impact of trade protection and the risk of lower-than-expected growth in the tourism sector.
       But in general, "the Thai economy as a whole was projected to continue to gain further traction driven by both external and domestic factors," the MPC said.
       The MPC's reference to lower-than-expected growth of the tourism sector is new compared to the previous policy statement from June and comes after more than 40 tourists, mostly Chinese, died in early July when a tour boat sank in a storm off the southern Thai resort island of Phuket.
        In March this year one MPC member voted to raise the rate by 25 basis points, the first time there was dissent in the committee in almost three years. In May the vote was unanimous but in June one member again voted for a rate hike.
        As in June, the dissenting MPC member argued that the economic expansion was sufficiently robust and prolonged monetary accommodation might induce households and businesses to underestimate potential changes in financial conditions.
        A rate hike now would thus help curb financial stability and start building policy space.
        However, the other 6 MPC members argued the current accommodative policy stance was conducive to economic growth and appropriate given the inflation target.
       In addition, the outlook for economic growth was still subject to risks from U.S. foreign trade policies and retaliatory measures from trading partners.
       Thailand's economy grew by an annual rate of 4.8 percent in the first quarter of this year and in June the International Monetary Fund forecast growth this year of 3.9 percent in 2018, unchanged from 2017, as investments are seen jumping 6.8 percent and consumption rising 3.7 percent.
       Thailand is benefitting from strong growth in exports, tourism and rising domestic demand, with BOT expecting merchandise exports to rise more than earlier expected due as some industries have relocated their production.
       The outlook for inflation is largely unchanged from previous assessments, with the annual average rate expected to be within BOT's target of 1 - 4 percent.
       As most other currencies, the Thai baht has depreciated this year against the U.S. dollar and BOT said the movements in the baht was in line with most regional currencies.
       "Looking ahead, the baht would likely remain volatile and thus the Committee would continue to closely monitor exchange rate developments as well as impacts on the economy," BOT said.
       The baht was trading at 33.2 to the dollar, down 1.8 percent this year.

Thailand holds rate, monitors inflation, domestic demand

      Thailand's central bank kept its policy rate steady at 1.50 percent, as widely expected, but said the "strength in the recovery of domestic demand and inflation developments must be monitored" although the overall outlook for economic growth continued to improve due to strong exports.
       The reference by the the Bank of Thailand (BOT) to monitoring inflation in addition to domestic demand is new as compared with the monetary policy committee's statements in recent months, signaling concern that inflation remains below the lower bound of bank's target and is projected to remain there this year.
       Given the BOT's concern over domestic demand and inflation, it maintained an accommodative monetary policy stance, saying this should help continue economic growth and thus "foster the return of headline inflation to target although this could take some time."
       Thailand's headline inflation rate was unchanged at 0.86 percent in October and September and in its September monetary policy report the BOT revised down its inflation forecast to 0.6 percent this year and 1.2 percent in 2018, with risks to inflation seen balanced.
       Inflation has been pushed lower due to lower prices of fresh food but the BOT expects inflation to slowly rise on a recovery in domestic demand, higher excise taxes and regulations on immigrant workers that may affect wages.
       The BOT targets inflation of 1-4 percent.
       Strong goods exports and tourism is fueling overall growth in Thailand's economy, which the BOT said was growing at a faster pace than previously assessed. And while private consumption is continuing to rise, the BOT said low-income households have yet to sufficiently recover and small and medium-sized firms are not fully benefitting from the recovery.
       In the September report, which was published Oct. 6, the BOT revised upwards its 2017 growth forecast to 3.8 percent from 3.5 percent as exports were seen growing by 8 percent. The 2018 forecast was revised up to 3.8 percent from a previous 3.7 percent.
      Thailand's Gross Domestic Product expanded by an annual 3.7 percent in the second quarter of this year, up from 3.3 percent in the first quarter, and the BOT has estimated third quarter growth of 4.0 percent.
       As in September, the BOT said the exchange rate of the Thai baht had remained stable against the U.S. dollar and largely unchanged against its trading partners but exchange rates could see high volatility due to uncertainty from U.S. economic policies and the monetary policy of other advanced economies.
         The baht, which was hit sharply during the "taper tantrum" of 2013, has been rising steadily since  December last year on rising optimism about the prospects for global growth and emerging market economies.
         The baht was trading at 33.1 to the U.S. dollar today, up 8.2 percent this year.

Thailand holds rate, monitoring rise in baht's FX rate

     Thailand's central bank left its policy rate at 1.50 percent, as expected, and maintained an accommodative monetary policy stance as improving domestic demand is not yet sufficiently broad-based and inflation had risen at a slightly slower pace than expected.
      But the Bank of Thailand (BOT), which has maintained its rate since April 2015, also put financial markets on notice that it was concerned about the rise in the exchange rate of the baht, which it attributed to the country's stronger external position along with "decreased investor confidence in the US dollar."
      "However, the Committee noted that the stronger appreciation of the baht relative to those of regional currencies in some periods might affect business adjustments and thus would continue to closely monitor developments in the foreign exchange market," the BOT's monetary policy committee said.
      The BOT has in recent months voiced its concern over the strength of the baht but today's statement is stronger than last month's statement when it merely observed that recent movements in the exchange rate were in line with regional currencies.
       The baht, which was hit sharply during the "taper tantrum" of 2013, has been rising steadily since  December last year on rising optimism about the prospects for global growth and emerging market economies.
      Today the baht was trading at 33.28 to the U.S. dollar, up 7.6 percent this year.
      Thailand's headline inflation rate rose to a lower-than-expected 0.17 percent in July from a fall of 0.05 percent in June, the second month of deflation, as fresh food prices fell due to improved harvest while inflationary pressures from domestic demand remained low.
       But the BOT still expects inflation to slowly rise in the second half of this year as supply side pressures slowly dissipate and domestic demand recovers. The BOT targets inflation of 1-4 percent.
      The outlook for Thailand's economy has been improving due to a rise in a wide range of merchandise exports, a continued expansion in tourism and higher agricultural output.
     And while domestic demand is also expanding, the BOT said it was not sufficiently broad-based while public investment growth was softer than expected and construction investment moderated.
     Thailand's Gross Domestic Product grew by an annual rate of 3.3 percent in the first quarter of this year, up from 3.0 percent in the previous quarter.
      In June the International Monetary Fund raised its 2017 growth forecast for Thailand to 3.2 percent from 3 percent while the BOT has forecast growth of 3.5 percent, up from 2016's 3.2 percent.

This week in monetary policy: Armenia, Thailand, Namibia, Egypt and Chile

    This week (August 13 through August 19) central banks from 5 countries or jurisdictions are scheduled to decide on monetary policy: Armenia, Thailand, Namibia, Egypt and Chile.

    Following table includes the name of the country, the date of the next policy decision, the current policy rate, the result of the last policy decision, the change in the policy rate year to date, the rate one year ago, and the country’s MSCI classification.

    The table is updated when the latest decisions are announced and can always accessed by clicking on This Week.

WEEK 33
AUG 13 - AUG 19, 2017:
COUNTRY	DATE	RATE	LATEST	YTD	1 YR AGO	MSCI
ARMENIA	15-Aug	6.00%	0	-25	7.25%
THAILAND	16-Aug	1.50%	0	0	1.50%	EM
NAMIBIA	16-Aug	7.00%	0	0	7.00%
EGYPT	17-Aug	18.75%	200	400	11.75%	EM
CHILE	17-Aug	2.50%	0	-100	3.50%	EM

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