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Bank of Thailand stands pat, likely to stay on hold throughout 2019

The Bank of Thailand kept the policy rate on hold at 1.75 percent today, as expected, in a unanimous decision. Since the 25 basis point hike last December, this is the third straight meeting where the policy rate is kept unchanged.

The Thai central bank seems hesitant to entirely shut the door on tightening monetary policy. It repeated its statement that “there remained a need to address financial stability risks through a combination of tools, including the appropriate policy interest rate as well as ‘micro and macro’ prudential measures”.

However, the Bank of Thailand acknowledged that the risks to economic growth are rising, and stated that the economy was likely to grow at a slower rate than predicted earlier. Recent economic data have been disappointing, and the risks to the 2019 growth forecast of 3.8 percent are firmly to the downside, said ANZ in a research report.

Looking at inflation, the central bank expects it to be at the low end of its target range of 1 percent to 4 percent. Even if the headline inflation has accelerated in recent months, driven by food and energy prices, it continues to be low, at only 1.23 percent year-on-year in April. Underlying price pressures have been quite soft, with core rate at just 0.61 percent.

“Overall, we think the combination of rising growth risks and benign inflation will make it difficult for the BoT to justify another rate hike. We are expecting it to stay on hold throughout 2019”, added ANZ.

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