Thai Monetary Policy Left Unchanged

June 10, 2015

In response to more sluggish economic growth as attested by only a 2.2% rise of real GDP between 4Q13 and 4Q15, the monetary policy committee (MPC) of the Bank of Thailand had cut the one-day repo rate twice earlier this year by 25 basis points each in March and April.  Even earlier, six reduction between November 2011 and March 2014 had reduced the key interest rate to 2.0% from 3.5%.  The rate leve is now 1.5%, the lowest since June 2010.  When the most recent cut was made two months ago, officials went to considerable lengths to stress how finely balanced the decision had been, and indeed there were two dissents against that final easing.  So today’s decision not to cut the interest rate further was the expected outcome.  The MPC statement released today makes a case for leaving the interest rate at its low level but also for why a further appears unnecessary.

The Committee judged that the conduct of monetary policy has thus far eased monetary conditions, while the direction of exchange rate movement has become more conducive to the economic recovery. Nevertheless, the Thai economy remained subject to downside risks, particularly from the global economy. Therefore, monetary policy stance should continue to be accommodative in order to support the economic recovery.  The risk of deflation remains low, as consumption continues to increase, while the prices of most goods and services still increase or stay unchanged, and inflation expectations are close to the inflation target.

Copyright 2015, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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