MPC decides monetary policy should be accommodative, keeps rate at 1.50%

The MPC took the view that monetary policy should remain accommodative while it stands ready to utilise an appropriate mix of available policy tools to ensure that monetary conditions are conducive to the economic recovery, while ensuring financial stability, he said.
The committee saw the need to preserve policy space given that the Thai economy would continue to face uncertainties, particularly the fragile global economic recovery and the monetary-policy directions of major advanced economies that might induce greater capital flow and exchange-rate volatility.
The MPC assessed that the Thai economy continued to expand at a pace close to the previous assessment, despite greater downside risks on both domestic and external fronts, Jaturong said. 
The inflation rate is expected to increase, but might return to the target level later than expected because of supply-side factors. 
Meanwhile, monetary conditions remain accommodative and conducive to the economic recovery, hence the committee decided to keep the policy rate unchanged at yesterday’s meeting.
Gross domestic product is projected by the panel to recover at a pace close to the previous assessment.
Exports of industrial goods have expanded more than expected, while private investment remained low despite some improvements seen in certain export-oriented manufacturing sectors, Jaturong said.
At the same time, tourism is expected to slow down as a result of the government’s measures to curb so-called zero-dollar tours. 
Private consumption has continued to expand, although some activities might slow down temporarily, while public expenditure continues to be an important growth driver. 
According to the committee’s assessment, the Thai economy remains on a recovery path, but downside risks have increased from the number of Chinese tourists, which could turn out to be lower than the previous projection, as well as uncertainties stemming from political developments in the United States and Europe.
Meanwhile, concerns over the European and Chinese financial sectors continue to warrant close monitoring.
In the MPC’s assessment, financial stability remains sound and able to provide a cushion against potential shocks and volatility in financial markets. 
However, there remain pockets of risk that warrant close monitoring, such as the deterioration in loan quality of some business sectors and search-for-yield behaviour under the prolonged low-interest-rate environment.