Bank of Thailand Didn’t Cut Policy Interest Rate Further

June 18, 2014

Five 25-basis point reductions had been authorized between November 2012 and March 2014, but the previous meeting on April 23 voted 6-1 for keeping the 2.0% policy rate, with a single dissent in favor of a sixth cut.  Today’s decision not to change policy drew a unanimous vote and was accompanied by a statement that expressed greater optimism than before in improving domestic demand in the future now that political uncertainty has been reduced in the wake of last month’s military coup. 

Economic recovery should pick up pace given reduced political  uncertainties  and  a  resumption  of  functioning  public  policy  management.  More  active  fiscal  policy  and  prevailing  monetary  policy  accommodation  should  lend support  to  a sustained  economic recovery.

That being said, projected GDP growth in calendar 2014 was revised downward because of a 0.6% contraction in the first quarter.  Inflationary pressure has meanwhile “edged higher,” providing a further deterrent to cutting the interest rate for a sixth time.

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



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