Bank of Thailand Leaves Policy Unchanged Defying Speculation of a an Ease

January 22, 2014

Following a policy meeting today, Thailand’s Monetary Policy Committee voted narrowly (4-3 with three wanting a 25-basis point interest rate cut) to retain a 2.25% central bank rate.  Analysts were expecting a rate cut because of soft economic growth, and a statement released by the MPC indeed acknowledges the softening of domestic demand and slower-than-forecast recent GDP growth.  However, the statement invokes the need to preserve financial stability, claims policy to be already supporting growth, and predicts that the slowdown will prove temporary.

The committee deems the current stance of monetary policy to be accommodative and appropriately supportive of economic recovery. The ongoing political situation poses risks to growth, but sound economic fundamentals should help the economy weather these short-term risks. In addition, safeguarding financial stability remains a cornerstone for economic recovery in the period ahead.

A final point made in the statement is that inflation remains contained.

In the two years to November 2013, officials implemented five 25-bp rate reductions to the present 2.25% level.  Previously, nine rate hikes between July 2010 and August 2011 lifted the rate to 3.5% from 1.25%.  And before that, four cuts from December 2008 to August 2009 slashed the rate by 250 basis points from a pre-Great Recession high of 3.75%.

Copyright 2014, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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