Thailand Central Bank Maintains Key Rate As Expected
2024-08-21
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(fxcue news) - Despite low inflation, the Bank of Thailand left its benchmark interest rate unchanged for the fifth straight session amid the fiscal policy uncertainty.
The Monetary Policy Committee voted 6-1 to hold the policy rate at 2.50 percent, the highest in more than a decade. The decision came in line with expectations.
One member sought 25 basis-point reduction to reflect lower potential growth due to structural challenges and to partly alleviate debt-servicing burden for borrowers.
"The majority of the Committee 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," the bank said in a statement.
Headline inflation is projected to gradually return to the target range by the end of 2024. At 0.83 percent in July, consumer price inflation remained well below the target of 1-3 percent.
The MPC noted that credit quality of household loans worsened partly due to the deterioration in debt serviceability of vulnerable households as a result of slow income recovery.
As economic growth is expected to slow further and inflation remains very low, the bank is likely to start loosening policy from October, Capital Economics' economist Shivaan Tandon said.
Data released earlier this week showed that the Thailand economy grew at the fastest pace in more than a year in the second quarter. Gross domestic product was up 2.3 percent. The government forecast growth in the range of 2.3 percent - 2.8 percent this year.
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