Thailand Leaves Policy Rate Steady At 2.50%

RTTNews | 36 days ago
Thailand Leaves Policy Rate Steady At 2.50%

(RTTNews) - Thailand's central bank decided to keep the interest rate unchanged for the fourth straight meeting on Wednesday as the inflation rate returned to the target range, despite the rising pressure from the government to cut rates to support economic growth.

The Monetary Policy Committee of the Bank of Thailand voted 6-1 to hold the policy rate at 2.50 percent.

The majority of the MPC deems that the current policy interest rate is consistent with the economy converging to its potential, as well as conducive to safeguarding macro-financial stability.

One member of the 7-member MPC voted to cut the policy rate by 0.25 percentage points to reflect the economy's lower potential growth amid structural challenges and to partly alleviate debt-servicing burden for borrowers.

"We think the weakness of the economy and very low inflation will persuade the central bank to loosen policy later in the year, but given the tone of the central bank's statement we are pushing back the timing of the first cut to the BoT's October meeting," Capital Economics economist Gareth Leather said.

Recent official data showed that Thailand's consumer price inflation rose to 1.54 percent in May from 0.19 percent in April. With this rise, inflation came in between the target range of 1.0 and 3.0 percent.

However, inflation is expected to increase as the effects of the domestic diesel price subsidy and the excess supply of certain raw food items are gradually phased out.

The bank expects headline inflation of 0.6 percent in 2024 and 1.3 percent in 2025. Meanwhile, core inflation is forecast at 0.5 and 0.9 percent for 2024 and 2025, respectively.

Overall, headline inflation is anticipated to gradually return to the target range by the fourth quarter of 2024 onwards, with medium-term inflation expectations remaining consistent with the target, the bank said.

The Thai economy continued to expand by 1.5 percent in the first quarter compared to last year, driven by household consumption and growth in tourist arrivals. Looking ahead, the economy is projected to expand by 2.6 and 3.0 percent in 2024 and 2025, respectively.

The bank reiterated that the policy rate remains consistent with improving growth and inflation outlook while fostering macro-financial stability in the longer term.

"However, it remains essential to monitor economic developments, especially the recovery of exports and government measures," the bank said in a statement.

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