Bank of Thailand Keeps Accommodative Monetary Stance

June 13, 2012

Monetary policy committee members voted unanimously to retail a 3.0% one-day repo rate and released a statement that outlined both growth and inflation risks.  On prices, it was noted that “the pass-through of costs to prices of goods and services continued to be sustained by robust domestic demand, while inflation expectation remained elevated in light of the minimum wage hike and the energy price structure reform.”  Despite such potential price pressure, it was deemed that greater priority at the moment needs to be placed on “maintaining an accommodative monetary policy stance in order to support a firm recovery of the Thai economy and temper some of the risks coming from the global economy. …Risks to global economy increased relative to the previous meeting, reflecting
heightened uncertainty about the future of Greece in the eurozone and banking problems in Spain. As a result, the contraction of the eurozone economy was projected to be more protracted than previously anticipated.”

The switch in policy direction was made last autumn.  Previously between July 2010 and August 2011, the MPC had raised its repo rate nine times from 1.25% to 3.50%.  But rate cuts of 25 bps each were implemented at the end of November and in January of this year.  Today’s statement acknowledged that Thailand had recovered from last autumn’s floods faster than expected but did not use this as an excuse to put inflation containment back ahead of the promotion of growth.

Copyright 2012, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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