MPC expected to maintain same policy rate on 27th

Pipat Luengnaruemitchai, assistant managing director of Phatra Securities, said one reason why the committee would decide not to touch the rate is that although the country did not show a clear sign of economic recovery in the third quarter, at least it was better than the second quarter, which pulled Thailand out of the technical recession.

The MPC is also expected to be concerned with the high household debt. If it cuts the policy interest rate, this might affect the whole economy, he said.

Kampol Adireksombat, senior economist at Tisco Securities, said that although the economic data in the third quarter showed decelerating growth, it was because the effects from the first car scheme policy had lost momentum. Cutting the rate might also not be able to effectively boost consumption.

If the MPC does decide to cut the rate, this would increase the fragility of the economy amid the high household debt, while the US Federal Reserve is preparing to taper its quantitative easing measure.

If the rate is cut, this will spark capital outflows. The current accommodative rate fits well with the current economic situation, he said.

The MPC decided to leave the policy rate at 2.50 per cent at its last three meetings, citing its suitability for economic expansion.

According to the National Economic and Social Development Board, the economy last quarter expanded 2.7 per cent on year and 1.3 per cent on quarter. The quarter-on-quarter rise came after a 1.2-per-cent decline in household spending and a 6.5-per-cent contraction in investment. In the first nine months, GDP grew 3.7 per cent on year.

Somprawin Manprasert, assistant professor of economics at Chulalongkorn University, said it might be difficult for the policy rate to be lowered, as household debt is quite high.

A cut would encourage consumption, which would lead to even higher household debt. It would make the economy more fragile.

"We need to ask in advance what the direction of the interest rate will be in the long term as currently, the world economy is starting to recover and the Thai economy is also returning to an upcycle.

"As a result, the interest rate direction should also be on the uptrend. Inflation in the future has also a tendency to rise. We believe that the interest rate in Thailand has already bottomed out and the MPC will decide to maintain their policy rate at the coming meeting," he said.

Piyasak Manason, an economist at Kiatnakin Bank, said the policy rate should be left alone as growth of the economy is still at a low level. Inflation is also at a lower level and private investment is slowing down.

Maintaining the policy rate will allow the overall economy to pick up the pace.

"The current economic situation is slowing down and it is more appropriate for the policy rate to be maintained so it will help stimulate investment and domestic consumption. I have seen no necessity for a reduction of the policy rate at this moment," he said.