Policy rate likely to stay unchanged
The Bank of Thailand (BOT) said it is not necessary to raise the policy rate amid the upward trend in global interest rates as fragility remains in the local system despite recovery of the economy without inflationary pressure.
BOT governor Veerathai Santiprabhob said despite the global upward trend of interest rates, the Monetary Policy Committee (MPC)’s decision is clear that local interest rates depend on the country’s economic conditions.
Each country’s monetary policy must respond to the country’s local economy. Currently, there is no inflationary pressure in Thailand while recovery of the Thai economy is relatively clear, he said.
Meanwhile, there could be fragility in some areas which has prompted the MPC to continue its monetary easing to help support a consistent economic recovery, he said.
A warning has been given to those who have large amount of foreign borrowings, he said, explaining that in an environment of upward interest rates comes, the cost of funding in US dollar should be planned carefully with proper foreign exchange risk management.
“We have decided to maintain a monetary easing policy. The exchange rate has been affected by external factors rather than policy situations. And sometimes, an interest rate gap is not a key factor,” he said.
The BOT’s stance has not been seen as a market surprise.
There have always been signals from the central bank and its policy-setting is based on regularly-reviewed information including economic conditions, financial stability and strength of economic recovery.
Earlier, the policy rate was maintained over concerns of the financial system’s stability which could be undermined by search-for-yield behaviour regardless of risks.
