Bank of Thailand Tightens for First Time Since August 2011

December 19, 2018

The Bank of Thailand’s one-day repo rate was lifted 25 basis points to 1.75% in an expected move. This was the first hike since August 2011 and the first rate change since a pair of 25-basis point cuts in March and April of 2015. According to a released statement, the rate hike was made in light of ” the prolonged low interest rate environment that might pose vulnerabilities to financial stability in the future” and ” to start building policy space,” meaning flexibility to stimulate growth should the economy slacken. The Monetary Policy Committee remains divided, however, as evidence by two dissenting votes from members concerned about softer external demand and wishing to monitor that situation longer. The previous November meeting that kept the key interest rate of 1.50% had produced a narrow 4-3 decision, with 3 votes for tightening.

Today’s statement lacks any urgency to follow up this first rate hike anytime soon: “The Committee viewed that accommodative monetary policy would remain appropriate in the period ahead, and thus would continue to closely monitor developments of economic growth, inflation, and financial stability, together with associated risks, in deliberating appropriate monetary policy in the period ahead.” Unlike some other Asian central banks that have already raised their interest rates, such as those in Indonesia and and the Philippines, Thailand has experienced a stable currency and has a current account surplus and low inflation.

Copyright 2018, Larry Greenberg. All rights reserved. No secondary distribution without express permission.



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