Wednesday, November 5, 2014

Thailand holds rate, stance "sufficiently accommodative"

    Thailand's central bank maintained its policy rate at 2.0 percent, as expected, saying "the current monetary policy is sufficiently accommodative and does not hinder the ongoing recovery" and was consistent with long-term financial stability.
    However, the Bank of Thailand (BOT), which cut its rate by 25 basis points in March, said it was concerned over the greater downside risks from global growth and the timeliness of public investments, with one of the seven members of its monetary policy committee (MPC) voting to cut the rate by 25 points to strengthen economic growth.
    The BOT's MPC voted by 6-1 to maintain the policy rate.
    Thailand's economy is expected to continue to expand in 2015, helped by exports and public investment.
    But growth in the third quarter of this year is expected to be less than forecast due to a slow recovery in domestic demand, including lower-than-expected public spending, and weak exports.
   Thailand's Gross Domestic Product expanded by 0.9 percent in the second quarter from the first quarter for annual growth of 0.4 percent, up from a contraction of 0.5 percent in the first quarter.
    The BOT has forecast growth this year of 1.5 percent, with growth in exports seen at zero percent, and in September it cut its 2015 growth forecast to 4.8 percent.

    Thailand's headline inflation rate eased to 1.48 percent in October from 2.09 percent in September while core inflation eased to 1.67 percent from 1.73 percent. The BOT, which targets core inflation of 0.5 to 3.0 percent, said the decline was due to lower commodity prices and subdued demand-side pressures.
      The BOT issued the following statement:

"The global economic recovery was slightly weaker than expected, with greater growth differentials across regions. The US economy continued to recover steadily, while recovery in the euro area and Japan remained tepid, with risks of a further slowdown. Meanwhile, growth in China and Asia moderated somewhat.
The Thai economy in the third quarter of this year is expected to expand less than previously assessed due to slow recovery in domestic demand, including lower‐than‐ expected public spending, and weak exports. However, exports are expected to gradually pick up in 2015, in tandem with global economic recovery. Additionally, public investment should help stimulate private investment in the periods ahead. Meanwhile, the overall financial system remained stable. Inflation declined owing to lower commodity prices and subdued demand‐side pressure.

The committee voted 6 to 1 to maintain the policy rate at 2.00 percent per annum, with one member voting to reduce the policy rate by 0.25 percent per annum. The committee projects sustained economic recovery in 2015, and deems that the current monetary policy is sufficiently accommodative and does not hinder the ongoing recovery. The stance is also consistent with long‐term financial stability. Nevertheless, the committee expresses concerns regarding greater downside risks from global growth and the timeliness of public investment spending. One member assessed that further accommodation is needed in order to reinforce the momentum of economic recovery.
The MPC will closely monitor developments of the Thai economy, and will pursue appropriate policy to ensure adequate support to the recovery, as well as long‐term financial stability. "

    www.CentralBankNews.info

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