Bank of Thailand stands pat in March, unlikely to change policy rate in 2018

The Thai central bank stood pat during its meeting today. The Bank of Thailand kept its policy rate unchanged at 1.5 percent. The policy statement repeated that an accommodative monetary policy is still necessary to nurture growth further. The central bank upwardly revised its economic growth projection for this year to 4.1 percent from the prior forecast of 3.9 percent.

The BoT expects the same growth rate to continue next year. The main drivers underlying this revision were continued strength in exports and tourism flows; ongoing rose in public expenditure which is also beginning to crowd in private investment; and moderate rebound in private consumption.

According to BoT, the rebound in private consumption has been moderate because the rebound is yet to sufficiently feed through into household incomes and employment in a widespread manner. The Bank of Thailand does not see inflation becoming a problem in spite of the stronger growth. It maintained that demand-pull inflationary pressures continue to be low. Structural changes in the economy are also playing a role.

The BoT also downwardly revised its headline and core inflation for this year to 1 percent year-on-year and 0.7 percent year-on-year from 1.1 percent and 0.8 percent previously. Indeed, headline inflation has averaged just 0.6 percent year-on-year in the initial two months of 2018, compared with 1.5 percent year-on-year in the same period of last year.

“We concur with the BoT’s views. Strengthening economic activity is likely to filter through prices only with a considerable lag. Although growth is gaining in breadth, there is scope for it to become more entrenched”, noted ANZ in a research report.

In all, the BoT is unlikely to tighten its monetary policy this year. It is expected to keep its policy rate at 1.5 percent through 2018, added ANZ.

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