Thai Monetary Policy Stance Left Unchanged as Expected

January 9, 2013

Thailand’s Monetary Policy Committee left the one-day repo rate at 2.75%, its level since October’s last of three 25-basis point cuts.  Earlier reductions were implemented in November 2011 and January 2012.  Previously, the main central bank interest rate had been cut during the Great Recession four times by a total of 250 basis points but thereafter hiked nine times between July 2010 and August 2011 from a low of 1.25% to a high of 3.5%.  Today’s vote, like the prior one on November 28, was unanimous.  The final rate reduction on October 17, in contrast, was decided by a split 5-2 verdict.

Today’s statement declares that “with remaining uncertainties in the global economy and inflation forecast within target (0.5-3.0%), the current monetary policy stance was appropriate in supporting domestic demand to sustain growth momentum. The MPC will, however, continue to closely monitor financial stability risks that may arise from persistently high credit growth, rising household debt, and volatile capital flows.”  Officials recently revised projected 2013 growth slightly higher, observing that the economy’s recent trajectory has been somewhat above their expectations.  Particular attention will be now paid to whether recent wage awards produce second-order effects on inflation.

The next policy announcement is scheduled for February 20.

Copyright 2013, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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