Bank of Thailand keeps interest rate at 1.5 pct, likely to maintain accommodative stance through 2017

The Bank of Thailand, today, kept its key interest rate on hold at 1.5 percent. The committee unanimously voted to keep the rate on hold during its meeting today. This move was widely expected by the Thai central bank. The BoT has kept its policy rate unchanged since April 2015.

There are no signs of private investment improving. Growth in private investment has been lingering around zero percent for the last 36 months despite of reductions in interest rate, totally 100 basis points, by the Thai central bank in the same period.

The year-to-date moderation in growth of the Leading Economic Index implies that the private investment outlook is not expected to accelerate in the medium term. Private consumption growth has moderated. Leading indicators of consumer spending indicate towards stabilization of growth at lower levels, noted ANZ in a research note. Consumer sentiment continues to be at unfavorable levels and growth rates moderated for the second consecutive month in October.

Thailand’s economic growth is expected to have dropped to 3.1 percent year-on-year in the September quarter from 3.5 percent growth seen in the previous quarter. The support from public spending is likely to have been insufficient to counter the private sector’s weak performance. This underpins the view that demand-pull pressure on both the headline and core inflation prints would continue to be weak for certain period of time, stated ANZ.

The Bank of Thailand is likely to keep its accommodative stance through next year. Even if credit growth has begun rising in recent months, the inability of private investment and capacity utilization to rise would keep economic growth below trend, added ANZ.