Policy rate unchanged as BOT prepares for new risks

Economy June 22, 2016 15:14

By The Nation

2,504 Viewed

The Bank of Thailand decided to keep the policy rate unchanged at today's meeting, apparently to save ammunition for new risks including the Brexit referendum.

"The committee saw merit in preserving policy space given that the Thai economy would still be facing risks going forward, such as the fragile global economic recovery, monetary policy divergence among major advanced economies, the result of the EU Referendum in the UK (Brexit) and financial stability concerns in China," said Jaturong Jantarangs, secretary of the Monetary Policy Committee (MPC).
The committee voted unanimously to maintain the policy rate at 1.50 per cent. One of seven MPC members was absent from the meeting. 
Going forward, he added, the committee viewed that monetary policy should remain accommodative, and stands ready to utilise an appropriate mix of available policy tools in order to ensure that monetary conditions are conducive to the economic recovery, while ensuring financial stability.
In deliberating monetary policy, the committee judged that the economy would continue to recover, and inflation would return to the target band within the latter half of the year as previously expected. 
The Thai economy continued to recover on the back of public expenditure and broad-based improvement in the tourism sector, while private consumption expanded as anticipated. However, expansion in private investment remained low, and exports still contracted in tandem with other Asian economies which were weaker than expected. Offsetting weak exports are domestic demand and the tourism sector. Persisting downside risks include weak demand from trade partners and private sector's fragile confidence. 
Jaturong noted that corporate financing and household credits continued to expand, although certain business sectors faced limitations in obtaining credits. Meanwhile, financial stability risks from the prolonged low interest rate environment, including search-for-yield behaviour, continued to warrant close monitoring.