Bank of Thailand keeps interest rate on hold

The Bank of Thailand’s Monetary Policy Committee members kept the 1-day repurchase policy rate at 1.50 percent. The policy statement was largely unchanged from the previous one. The only two noteworthy changes were that inflation be a bit higher than in its previous assessment due to elevated global crude oil prices and that export growth might also be stronger than previously expected as some industries have relocated their production base to Thailand. Both these changes imply a modest upward revision to the central bank’s inflation and GDP forecasts.

According to an ANZ research report, the minutes of policy review would be more telling. In the earlier minutes, the MPC was of the view that if economic growth continues and inflation moves more strongly within the target, the need for a policy rate rise to rebuild policy space in the future would increase.

This view was partially repeated by Assistant Governor Jaturong Jantarangs in a post policy media briefing. The conditions for policy normalization are likely to come together.

Although still mild, headline inflation has now been in the central bank’s target range of 1 percent to 4 percent for the fourth straight months through July. Growth momentum is not just favourable but also appears to be trickling down. Most components of the consumer confidence survey including current and future incomes, employment and purchasing decisions have strengthened.

At the corporate level, the rebound in confidence now encompasses small and medium enterprises. Combined, the widespread upturn in sentiment partially dispels the long-standing concern of the authorities that the benefits of growth are not broadening out.