Thailand Central Bank Holds Rate Steady

(RTTNews) - The Bank of Thailand left its key interest rate unchanged on Wednesday after reducing it in the previous rate-setting session as policymakers assessed that the current level was consistent with the macroeconomic conditions.

The Monetary Policy Committee unanimously decided to hold the policy rate steady at 2.25 percent. That was in line with economists' expectations. The previous change in the policy rate was a quarter-point reduction in October.

"The Committee voted to maintain the policy rate, deeming the current rate is consistent with the economic trajectory close to potential, inflation moving towards the target range, and safeguarding long-term macro-financial stability, together with preserving policy space amid increasing uncertainties going forward," the central bank said.

The BoT retained the Thai economic growth projections for this year and next at 2.7 percent and 2.9 percent, respectively.

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The bank expects tourism and domestic demand to continue to be the main drivers of growth, as well as exports of electronics and machinery in line with the expected recovery in the global technology cycle.

However, the bank expressed concern over the unevenness of the economic recovery across sectors, especially the sluggish recovery for small and medium enterprises and the pressures faced by some manufacturing industries from the erosion of competitiveness.

Inflation forecasts for this year and next were trimmed to 0.4 percent and 1.1 percent, respectively, from 0.5 percent and 1.2 percent predicted in October. The bank expects energy inflation to remain low given global crude oil prices.

Meanwhile, core inflation projections for this year and next were raised to 0.6 percent and 1.0 percent, respectively, from 0.5 percent and 0.9 percent in tandem with the economic outlook and cost passthrough for food items "Overall, medium-term inflation expectations remain consistent with the target," the bank reiterated.

Capital Economics economist Gareth Leather described the latest BoT decision as "a pause rather than an end to the easing cycle".

"With inflation set to stay very low and growth likely to struggle, we are expecting a total of 75bps of cuts next year," the economist said.