Thailand's central bank kept its policy rate steady
at 1.50 percent, as expected, and said its policy stance "should continue
to be adequately accommodative" and it "will stand ready to utilize
an appropriate mix of available policy tools in order to support the economic
recovery, while maintaining long-term economic and financial stability.
The Bank of Thailand (BOT), which cut
its rate in March and April by a total of 50 basis points, added that it had
maintained the rate today because its past decisions had eased monetary
conditions "while the direction of exchange rate movement has stayed
conductive to the economic recovery."
The Thai baht started depreciating in
April this year and has continued to drop, helping the competitive position of
Thai exports. Today the baht eased further in response to the BOT's decision to
trade at 35.19 to the U.S. dollar, down 6.5 percent this year.
The BOT, which last week again
trimmed its growth forecast for this year to less than 3.0 percent, said the
economy had continued to recover "gradually" in the second quarter
and is expected to maintain a similar pace during the rest of the year.
However, downside risks had risen
from the slowdown in China and domestic drought while export of goods had
contracted more than previously assessed due to lower demand from China and
other Asian economies.
In March the BOT cut its 2015 growth
forecast to 3.0 percent from 3.8 percent and last week a senior director in the
bank's economic and monetary policy department said the worse-than-expected
performance of exports had led it to cut its forecast to less than 3
percent.
In September the BOT will update its
March forecast.
In the first quarter of this year the
Thai economy expanded by 0.3 percent from the fourth quarter for annual growth
of 3.0 percent, up from 2.1 percent.
The BOT also said it expects headline
inflation to remain in negative territory due to energy costs but is likely to
have bottomed out and gradually pick up in the second half of the year. But the
point of inflation turning positive might be delayed due to limited demand-side
pressures and a slower-than-projected recovery of global oil prices.
Thailand's headline inflation rate
was minus 1.05 percent in July compared with minus 1.07 percent in June, for
the seventh month in a row of deflation.
The Bank of Thailand issued the
following statement:
"The Committee voted unanimously
to maintain the policy rate at 1.50 percent per annum.
Key considerations for policy
deliberation are as follows.
The Thai economy continued to recover gradually
in the second quarter, and is expected to maintain the similar pace of recovery
during the rest of the year. Nevertheless, downside risks increased from a
slowdown in the Chinese economy and the adverse impact of domestic drought.
Higher-than-expected improvement in tourism and high investment spending by the
government remained the main growth drivers. Meanwhile, private consumption and
investment improved at a measured pace. However, exports of goods contracted
more than previously assessed due to subdued prices and reduced volume as a
result of lower demand from trading partners, especially China and other Asian
economies.
Headline inflation continued to stay in the
negative territory due mainly to energy costs. However, it is likely to have
bottomed out, and is expected to gradually pick up in the second half of the
year as the base effect of high oil prices begins to wane. The Committee will
continue to closely monitor domestic price development as the period at which
headline inflation is expected to turn positive might be delayed as a result of
limited demand-side pressure and slower-than-projected global oil price
recovery.
In deliberating monetary policy, the Committee
judged that the conduct of monetary policy has thus far eased monetary
conditions, while the direction of exchange rate movement has stayed conducive
to the economic recovery. Therefore, the policy interest rate should be kept
unchanged at this meeting. The Committee were of the view that monetary policy
stance should continue to be adequately accommodative, and will stand ready to
utilize an appropriate mix of available policy tools in order to support the
economic recovery, while maintaining long-term economic and financial
stability. "
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