Bank of Thailand benchmark rate kept at 1.5 percent for the 19th time

The Bank of Thailand’s Monetary Policy Committee on Wednesday unanimously decided to retain the benchmark interest rate at 1.5 percent.

Mr Jaturong Jantarangs, Secretary of the Monetary Policy Committee (MPC), said it was the 19th time that the committee decided to retain the policy rate at 1.5 percent which will enable the economy to further expand.

In deliberating their policy decision, the Bank of Thailand Committee’s decision assessed that the Thai economy would grow at a faster pace than the previous assessment, driven by expansion in merchandise and service exports and a continued recovery in domestic demand that started to be more broad-based.

Headline inflation projected to edge up

Headline inflation was projected to edge up albeit at a slower pace than previously expected mainly because of supply-side factors, especially fresh food prices. Overall financial conditions remained accommodative and conducive to economic growth.

Hence, the Committee viewed that the current accommodative monetary policy stance remained conducive to the continuation of economic growth, and it should foster the return of headline inflation to target although this could take some time. Thus, the Committee decided to keep the policy rate unchanged at this meeting.

Thai economy gained traction on exports and tourism

The Thai economy gained further traction on account of stronger growth in merchandise exports and tourism driven by a stronger global economic recovery. Private consumption continued to expand on the back of services and durable goods.

Nonetheless, overall private consumption gradually expanded as household purchasing power was not sufficiently strong, particularly low-income households whose income had yet to fully recover.

Private investment picked up across various business sectors

Private investment in machinery and equipment picked up across various business sectors and was expected to gradually expand. Meanwhile, public investment remained an important growth driver, although it would likely slow down in the near term following accelerated disbursement in the previous period.

Nevertheless, the improved growth outlook was still subject to both domestic and external risks that warranted close monitoring, such as impacts from regulations on immigrant workers, uncertainties pertaining to US economic and foreign trade policies, and geopolitical risks.

Headline inflation increased at a slower pace than the previous assessment

This was due primarily to the decline in fresh food prices as a result of higher output of vegetable and fruits thanks to favorable weather conditions. Meanwhile, demand-pull inflationary pressures remained low, and would be subject to structural changes that might lead to slower pace of inflation than in the past.

Nevertheless, headline inflation was projected to slowly rise from the recovery in domestic demand, an increase in excise tax, and regulations on immigrant workers that might affect wages going forward. The public’s inflation expectations remained close to the midpoint of the target.