The Bank of Thailand (BoT) kept its key interest rate unchanged at 2.75 per cent for its third straight meeting on Wednesday, resisting government pressure to slash the rate to stem foreign inflows.
Monetary Policy Committee (MPC) secretary Paiboon Kittisrikangwan announced the decision of the meeting that it voted 6 to 1 to maintain the policy interest rate as before.
“The MPC judged that the accommodative monetary policy stance contributed to sustained growth of the economy, while inflation has been kept within the target range. However, given remaining uncertainties surrounding the global economic outlook and risks to domestic financial stability including from rising asset prices, the MPC voted 6 to 1 to maintain the policy interest rate at 2.75 per cent,” the committee said in a statement.
One member “viewed risks stemming from volatile capital flows and fragile economic momentum [such as] to warrant a 0.25 per cent reduction,” it said.
There are still concerns over monetary stability following continuing growth signals of credit and household debt, risks that need close monitoring to prevent a bubble in the future.
“The MPC took all factors into consideration before making the decision. It did not only consider the capital inflows,” said Mr Paiboon.
The committee said it will continue to monitor risks to financial stability as well as capital flows and stands ready to take action as appropriate.
The Stock Exchange of Thailand (SET) index closed Wednesday at 1,546.64 points, up 14.57 points in trade worth Bt63 billion. (MCOT online news)
No. 8/ 2013 Monetary Policy Committee’s Decision on 20 February 2013
Mr. Paiboon Kittisrikangwan, Secretary of the Monetary Policy Committee (MPC), announced the outcome of the meeting today as follows. The global economy has been more stable and exhibited signs of improvement since the last meeting. The Chinese and Asian economies have expanded well on the back of strong domestic demand and better prospects of exports.
Domestic consumption and investment in the US continued to expand and, if sustained, should lend support to the economy going forward. The eurozone economy remained in recession and would take time to fully recover. Economic growth in Japan has yet to gain traction, but the planned fiscal and monetary stimulus should gradually help stabilise the economy.
Despite improving overall outlook, the global economic recovery is still subject to downside risks, from the eurozone’s sovereign debt problems and uncertainties regarding the US fiscal consolidation. The Thai economy expanded more than expected in the fourth quarter of 2012, spurred by domestic demand amid strong economic fundamentals as well as accommodative monetary and fiscal policies. The economy is expected to grow faster than previously projected in the periods ahead, with domestic demand being a key growth driver together with a gradual recovery of exports.
Inflationary pressure has risen somewhat, as a result of an increase in oil prices. The MPC judged that the accommodative monetary policy stance contributed to sustained growth of the economy, while inflation has been kept within the target range.
However, given remaining uncertainties surrounding the global economic outlook and risks to domestic financial stability including from rising asset prices, the MPC voted 6 to 1 to maintain the policy interest rate at 2.75 percent per annum. One member viewed risks stemming from volatile capital flows and fragile economic momentum to warrant a 0.25 percent reduction. Going forward, the MPC will continue to closely monitor risks to financial stability as well as capital flow situation and stand ready to take actions as appropriate.
Bank of Thailand 20 February 2013 For further information, please contact: Monetary Policy Strategy Team 1 Tel: +66 (0) 2283 6186, 356 7872 email: MonetaryPolicyStrategyTeam1@bot.or.th
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