Thailand Maintains Key Policy Rate on Hold

Thailand's central bank unanimously left the policy rate unchanged at 1.5 percent at its December 16th meeting, as expected. While judging that monetary conditions and exchange rate remain supportive to the economic recovery, policymakers said headline inflation is projected to rise gradually and to turn positive during the first half of next year, as the base effect of high oil prices wanes.

Statement by the Bank of Thailand:

From the third quarter to October 2015, the Thai economy gradually recovered, supported by high disbursement of public expenditure, an expansion in private consumption of necessity goods, and an improving number of tourist arrivals, especially Chinese tourists. Meanwhile, merchandise exports continued to contract, and going forward would continue to face downside risks from a slowdown in the Chinese and other Asian economies and subdued commodity prices. Nevertheless, the economic growth forecast for 2015 was slightly revised up on the back of continued expansion of consumption and fiscal stimulus measures. The economic growth forecast for 2016 remained close to the previous assessment.

Inflationary pressure declined slightly from the previous meeting due mainly to a fall in global oil prices, causing headline inflation to stay in negative territory. Meanwhile, deflationary risks remain contained as demand continues to expand and core inflation is still positive, consistent with medium-term inflation expectations of the public.

The Committee assessed that monetary conditions and exchange rate remain supportive to the economic recovery. Moreover, given financial stability considerations and a potential rise in financial market volatility due to monetary policy divergence among advanced economies, the policy interest rate should be kept unchanged at this meeting. However, the Committee will continue to closely monitor downside risks to growth, particularly those stemming from a slowing global economy, structural limitations, and uncertainty in the global financial markets.

Looking ahead, monetary policy stance should continue to be sufficiently accommodative. The Committee stands ready to utilize an appropriate mix of available policy tools in order to support the economic recovery, while ensuring financial stability.

Thailand Maintains Key Policy Rate on Hold

Bank of Thailand l Rida Husna |
12/16/2015 7:51:05 AM