Thailand’s central bank kept its interest rate unchanged on Wednesday, as policymakers assessed that the policy stance remained conducive to the continuation of economic growth and maintenance of the inflation target.
The Monetary Policy Committee of Bank of Thailand voted 5-2 to hold the policy rate at 1.50 percent. The decision was in line with economists’ expectations.
“The Committee viewed that monetary policy should remain accommodative, although the need for currently accommodative monetary policy would be gradually reduced,” the bank said.
The gap in the MPC widened this month with one more member seeking a quarter-point hike to 1.75 percent.
The two members viewed that the continued economic expansion was sufficiently robust and that prolonged monetary accommodation induced households and businesses to underestimate potential changes in financial conditions, the bank said.
Hence, they sought a hike to curb financial stability risks that could affect the sustainability of economic growth over the longer term and to start building policy space, the bank added.
The central bank expects merchandise goods export growth to slowdown in future due to the trade tensions between the U.S. and China. This would be partially offset by benefits from the relocation of production base to Thailand for some industries, the bank hoped.
Core inflation was expected rise slightly, but at a somewhat slower rate than previously assessed Policymakers expect structural changes to contribute to more persistent inflation than in the past.
The bank expects the baht to remain volatile and said would continue to closely monitor exchange rate developments.
Capital Economics expects a quarter-point hike in interest rates before the end of this year.