No change in rate expected till late 2016
The Bank of Thailand is expected to maintain the policy rate at 1.50 per cent through late next year.
HSBC Thailand, Siam Commercial Bank and Kasikorn Research Centre shared the view.
SCB said in a research note that Thailand has not yet registered full economic recovery. Meanwhile, the hikes in US rates could spur capital outflows, blocking Thailand's ability from cutting the rate further.
It noted that if the US rates are hiked by 50-100 basis points as expected, rapid capital outflows are anticipated. This would sharply weaken the baht against US dollar.
"The BOT's comments suggest it is still comfortable staying in wait-and-see mode and continue to give significant attention to financial stability. We expect the BOT to keep rates on hold through 2016, even if we see growth undershooting the central bank's optimistic forecasts," said HSBC economist Nalin Chutchotitham.
The Bank of Thailand's Monetary Policy Committee today decided to maintain the policy rate at 1.50 per cent, as expected.The MPC convened today, when global markets anxiously waited for the US Federal Reserve's decision.
The Fed on Tuesday began a two-day meeting. The decision will be released on Wednesday at 2pm (1900GMT) with markets prepared for an initial 25 basis point "lift off" that would move the Fed's target rate from the zero lower bound to a range of between 0.25 and 0.50 percentage points. It is to be followed by a news conference by Fed Chair Janet Yellen to elaborate on the central bank's latest policy statement.
The Stock Exchange of Thailand Index was 1.39 points or 0.11 per cent lower to 1,299.12 points as of 4.46pm. Yesterday, the index gained 2.60 per cent to close above 1,300 points.
Phillip Capital Securities said in a research note that there was a limited upside gain in the Thai market today, given the Fed's meeting as well as the 4G licence auction.
Four telecom companies have fought hard for two licences, pushing the combined auction prices to above Bt70 billion as of 2pm today.
Jaturong Jantarangs, secretary of MPC, said that the committee assessed that monetary conditions and exchange rate remain supportive to the economic recovery.
The decision was also based on financial stability considerations and a potential rise in financial market volatility due to monetary policy divergence among advanced economies.
"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," he said.
The MPC said it slightly revised up the economic growth forecast for 2015 on the back of continued expansion of consumption and fiscal stimulus measures. The economic growth forecast for 2016 remained close to the previous assessment.
From its assessment, from July through October, 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.
Yet, exports continued to contract and downside risks persisted due to a slowdown in the Chinese and other Asian economies and subdued commodity prices.
Inflationary pressure further declined due mainly to a fall in global oil prices. Headline inflation is expected to turn positive during the first half of next year as the base effect of high oil prices wanes. 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.
