MPC unanimously keeps policy rate at 1.50%
THE CENTRAL BANK’S Monetary Policy Committee yesterday voted unanimously to maintain the policy interest rate at 1.50 per cent, said MPC secretary Jaturong Jantarangs.
The committee judged that the economy would continue to expand at a rate close to the previous assessment but face greater downside risks on the domestic front. Nonetheless, current monetary conditions have eased further as bond yields remained low, and commercial banks’ lending rates declined.
Therefore, the Bank of Thailand’s key rate should be kept on hold to preserve policy space, while risks to financial stability from search-for-yield behaviour still warrant close monitoring.
The MPC took the view that monetary policy should remain sufficiently accommodative, and stands ready to utilise an appropriate mix of available policy tools in order to ensure that monetary conditions are conducive to economic recovery, while ensuring financial stability.
The committee took the position that the Thai economy continued to recover gradually on the back of public expenditure while the tourism sector expanded with the broad-based increase in the number of inbound tourists.
However, merchandise export volume, excluding gold, contracted while private investment remained low, with expansion seen only in some business sectors.
At the same time, private consumption slowed, partly from the impact of the current drought on the income of agricultural households. As such, the balance of risks to economic growth was judged to be tilted more to the downside than previously assessed.
Meanwhile, the global economic recovery remained fragile. The baht, which strengthened against some trading-partner currencies in some recent periods, might not be as conducive to the economic recovery as it could be.
Monetary-policy divergence among advanced economies will continue to be a major contributing factor to capital flow and exchange-rate volatility, the MPC said.
Headline inflation turned positive in April as the base effect of high oil prices dissipated, and fresh-food prices accelerated from temporary factors. However, demand-side inflationary pressure remained subdued, as reflected by stable core inflation.
The MPC assessed that headline inflation would gradually rise as the aforementioned base effect continued to wane, although the inflation outlook could be affected by uncertainties pertaining to global oil-price movements and softened domestic demand.
