The Bank of Thailand's rate decision today did not surprise economists, as the Thai economy is slowly recovering.
Gundy Cahyadi, DBS economist, said that the rate should stay unchanged through the rest of the year and probably until mid-2015.
"The economy might have just avoided slipping into a technical recession in the second quarter. But the outlook is still far from being robust. So there will be no rush for a rate hike," he said.
DBS expected Thailand's growth momentum to pick up late 2014, but but a return to near-term potential will still take some time, even if the government is going to be clearly pro-growth going forward. At the same time, another rate cut is unlikely to be much of use to boost economic growth.
"If anything, a stronger baht may help to boost domestic demand, which is behind the weak GDP growth picture. And rising inflationary pressures could resurface and haunt the central bank again. Inflationary pressures remain prevalent in the economy – a quick look at core inflation is indicative of this," he said.
At its meeting today, the Monetary Policy Committee voted unanimously to maintain the rate at 2 per cent.
Paiboon Kittisrikangwan, secretary of the MPC, said that the global economy continued to improve steadily, while the Thai economy showed signs of improvements in the second quarter of 2014, from private spending following the political resolution.
"The committee judges that current accommodative monetary policy remains appropriate in supporting economic recovery. The policy stance is deemed consistent with long-term financial stability, which should complement government’s reform efforts to lift the economy’s potential growth," Paiboon said.