BANGKOK – Thailand’s central bank held its key interest rate near a record low to shield the nation’s economic recovery as the threat of trade protectionism mounts.
The one-day bond repurchase rate was left at 1.5 percent, with monetary policy committee members unanimously in favor, the Bank of Thailand said in Bangkok on Wednesday. All 22 economists surveyed by Bloomberg predicted the decision.
“Monetary policy should remain accommodative,” the central bank said in a statement, citing U.S. economic and trade policies among risks. Policy makers stand ready to use tools to ensure monetary conditions are conducive to the economic recovery, while ensuring financial stability.
Thailand’s economic growth is lagging peers in Southeast Asia, with the International Monetary Fund forecasting expansion of 3.3 percent this year. Rising protectionism in the U.S. is clouding the outlook for the nation’s exports, which account for more than half of the economy and barely grew last year. Private investment remains weak.
“Looking ahead, the BoT will want to keep monetary policy accommodative to support the economy,” said Krystal Tan, an economist at Capital Economics Ltd. in Singapore, who forecasts rates will remain unchanged this year. “The central bank’s private consumption and investment indicators both weakened in the fourth quarter, while a recent crackdown on cheap tour packages has hurt the tourism sector.”
U.S. President Donald Trump’s policies pose high risks to growth, both on the upside and the downside, and the central bank will conduct analyses of how those scenarios may play out, Assistant Governor Jaturong Jantarangs said at a briefing after the decision. Policy makers will review their economic growth forecasts for 2017 and 2018 at the next meeting.
The recent strength of the baht might not be good for the economic recovery, the central bank said. The currency has risen about 1.8 percent in the past month, among the best performers in Asia.
Consumer prices rose 1.55 percent in January from a year earlier, the fastest in 28 months. The central bank aims to keep inflation in a range of 1 percent to 4 percent this year.
The Bank of Thailand is “likely to maintain its accommodative policy stance for as long as the growth recovery remains tentative,” Gundy Cahyadi, an economist at DBS Group Holdings Ltd. in Singapore, said before the decision. “Exports have contributed very little to growth. Domestic demand, particularly investment is still going to be slow.”