BoT stresses on need to preserve monetary policy space, risks to global growth persist

The Bank of Thailand has stressed the need to preserve the monetary policy space, post its monetary policy meeting held Wednesday and said that rising risks to global growth persist. Also, the bank kept interest rates unchanged yesterday, in another unanimous vote.

At 1.5 percent, the current interest rate sits just 25 basis points off the lows seen during the 2008-09 crisis. Gross domestic product growth may trend around 3 percent currently, below its potential, but it is still some distance above the negative growth seen during the crisis.

While the central bank remains optimistic that inflation will meet the target, it is now expected to take a longer time. Presumably, this has to do with the disappointing July CPI, which came in at 0.1 percent y/y earlier this week.

Meanwhile, the BoT also suggested that it is not comfortable with a strong baht, amid concerns about export competitiveness. Focus will majorly remain on two key upcoming events. Referendum on the new constitution is scheduled for Sunday, results of which may bring some certainty to the political scene.

Further, the second quarter of 2016 GDP is also due later this month. If GDP growth were to improve from the 3.2 percent y/y seen in the first quarter of 2016, the BoY is even less likely to see the urgency to lower interest rates towards the year-end, DBS reported.