Thai central bank seen holding key rate on Wednesday as growth slows, risks rise

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Thai central bank seen holding key rate on Wednesday as growth slows, risks rise

By Orathai Sriring

 

FILE PHOTO: Thailand's central bank is seen at the Bank of Thailand in Bangkok, Thailand in this April 26, 2016 file photo. REUTERS/Jorge Silva/File Photo

 

BANGKOK (Reuters) - Thailand's central bank is expected to keep its benchmark policy rate steady on Wednesday for a second straight review after a hike in December, a Reuters poll showed, in a bid to support a slowing economy while inflation remained low.

 

All 19 economists surveyed by Reuters predicted the Bank of Thailand (BOT)'s monetary policy committee (MPC) will keep its one-day repurchase rate at 1.75 percent.

 

The rate was at near record lows when it was raised by 25 basis points in December, the first hike since 2011, in a bid to reduce risks to financial stability.

 

The MPC kept the rate on hold last month, saying an accommodative policy would remain appropriate in the period ahead and any policy rate increase would be gradual and data-dependent..

 

"We expect the BOT to stay on hold as growth and inflation are slow. It will likely revise down its 2019 growth forecast," said Charnon Boonnuch, a Nomura economist in Singapore who expected growth of 3.4 percent this year.

 

Annual headline inflation was 0.73 percent in February, staying below the central bank's 1-4 percent target range for four straight months..

 

Governor Veerathai Santiprabhob said last month Southeast Asia's second-largest economy was expected to slow in the current quarter due to increased global risks, but it was still on track to hit the full-year forecast of 4.0 percent. New estimates are expected on Wednesday.

 

The economy expanded 4.1 percent last year, the fastest pace in six years.

 

The economy relies heavily on external demand and exports have softened amid rising global trade tensions, while the baht is the best performing currency in Asia this year.

 

Political uncertainty also poses risks to the economy as Thailand prepares to hold a general election on March 24, the first since a 2014 military coup.

 

"Whoever wins, the shift towards economic populism is likely to continue, delaying reforms needed to raise productivity growth and deal with the worsening demographic outlook," Capital Economics said.

 

However, there is a risk of civil unrest if voters feel they were denied a free and fair election, it said.

 

"Another outbreak of protests and violent conflict, similar to those observed in 2010 and 2014, would deal a significant blow to the economy," the consultancy said.

 

Nine of 14 analysts who gave a medium-term view said they did not foresee a rate change until the fourth quarter, while five analysts expected the bank to move sooner.

 

Bank of Ayudhya economist Sarun Sunansathaporn expected a rate rise in June to curb risks to financial stability and create policy space if first quarter growth momentum carried on.

 

Standard Chartered economist Tim Leelahaphan predicted two rate hikes of 25 basis points each in the second and fourth quarter, citing financial stability risks and strong domestic demand.

 

Singapore-based ING economist Prakash Sakpal saw no change in policy this year, but "the balance of risks remained tilted toward growth, warranting an increase in policy accommodation".

 

(Additional reporting by Satawasin Staporncharnchai in BANGKOK and Khushboo Mittal in BENGALURU; Editing by Darren Schuettler)

 

-- © Copyright Reuters 2019-03-18

[MisterPenguin]

So it will retain existing low rates rates while inflation remains low and the economy slows down?

 

Interesting.

 

I have a feeling my pension is going to go up this year - and thst's without factoring in Prayuth's 'economic miracle'.

[Sir Dude]

Rate normalization needs to start happening everywhere as next time there is a big financial problem there are no rates to cut now to soften the blow. Having economies reliant on super low interest rates, or basically free money to borrow, is inherently dangerous in the medium to longer term. Having interest rates at 5% before 2008 helped stave off the worst of the crisis as there was room to cut and stimulate...but that bus has sailed and we are now a decade on from it with some economic analysts saying the next storm is just round the corner. It is also good to encourage people to save money and not to try to get them to spend spend spend all the time so as to prop up economies at unrealistic levels for political ends.

[Srikcir]

Flashback to 2018-01-04

• India and Thailand may have to give freer rein to the rupee and baht this year to avoid triggering U.S. accusations that they’re manipulating their currencies to support exports.
• The Reserve Bank of India has already exceeded a key threshold on how much it can intervene to curb the rupee’s gains that the U.S. monitors, according to Nomura Holdings Inc. Policy makers in Thailand have also passed this level with the baht, said Bank of Tokyo-Mitsubishi UFJ Ltd.

https://forum.thaivisa.com/topic/1018653-thailand-india-risk-landing-on-currency-manipulator-watchlist/

Nothing has changed.

[lipflipper]

Growth slows, risk rise, household debt is out of control, exports are down again. Yep, all is well with the Thai economy, ha ha ha.

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