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Thai rate remains accommodative: Moody's

Despite escalating political tension and violence, the Bank of Thailand will likely leave rates unchanged at 2.25 per cent, according to Moody's Analytics.

The Monetary Policy Committee convenes today, outside the BOT’s headquarter for the first time since its establishment. The press conference will take place at the note printing house in Nakhon Pathom.

Fred Gibson, associate economist of Moody’s Analytics, said in a research note that the 2014 growth outlook has been revised down as the political impasse weighs on domestic production and spending. Yet, as political tension lingers, foreign investors could continue pulling out funds in coming weeks.

"The Bank of Thailand will likely hold rates at its first meeting in 2014, following November's 25-basis point rate cut. That said, the odds of a rate cut have risen to support the economy amid escalating political tension and violence," he said.

Moody's Analytics has revised down its 2014 GDP growth forecast to 3.2 per cent after projecting a 5.3 per cent rise in early November. If the political situation worsens, further downward revisions can be expected. Lower rates would support confidence and encourage spending; however, it would do little to offset the fallout from growing political unrest. Severe disruptions in the nation's capital, Bangkok, which houses Parliament, the largest airport and second largest port, commercial operations and shopping malls, will likely weigh on production and consumer spending.


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