No change in policy rate anticipated

Nalin Chutchotitham, economist at HSBC Bangkok, implied in her research note that the central bank was less concerned about growth prospects in light of commitments to higher public spending, and any weapons left should be saved for later use.

"The central bank is increasingly concerned that volatility in the financial markets may rise because of the monetary-policy divergence among major economies, and it wants to put greater emphasis on its role in safeguarding economic stability rather than on short-term demand management.

"Last but not least, it is maintaining its view that some policy room should be reserved for unexpected events, especially as policy transmission is much reduced at the current low interest rate," she said.

Low headline and core inflation offers plenty of elbowroom for rate cuts if needed. Last month, headline inflation was minus-0.53 per cent, while core inflation, which excludes volatile food and energy prices, was only slightly positive a 0.59 per cent.

The month-on-month core inflation was the lowest since May 2010. Energy prices in January were 10.5 per cent lower than the same month last year, but showed an improvement from the 13.4-per-cent year-on-year contraction seen in December.

Downgrading its forecasts for headline and core inflation this year from 1.3 per cent and 1 per cent to 0.6 per cent and 0.7 per cent, Tisco Securities noted that the central bank might adjust its monetary policies in the next meetings.

"Headline inflation is clearly going to get distorted by the slump in oil prices. Pay attention to the trend in core inflation ahead, though, for this could be an early indication of the strength of domestic demand.

"As we know, domestic demand was disappointing last year, because of lacklustre private consumption growth," said Gundy Cahyadi, economist at DBS.