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Thai central bank concerned about risks to financial stability: minutes

Wednesday, May 25, 2016 - 12:16
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Thailand's central bank held interest rates steady this month as risks to financial stability rose and as a further cut in interest rates was likely to have had little impact on the economy, minutes of the bank's May 11 meeting showed on Wednesday.

[BANGKOK] Thailand's central bank held interest rates steady this month as risks to financial stability rose and as a further cut in interest rates was likely to have had little impact on the economy, minutes of the bank's May 11 meeting showed on Wednesday.

On May 11, the Bank of Thailand (BOT)'s policy committee voted 7-0 to keep the one-day repurchase rate at 1.50 per cent, just a quarter point above the record low reached during the global financial crisis.

The last rate change was a 25-basis-point cut in April 2015.

The minutes showed policy makers were concerned about a rise in overall risks to financial stability on the back of search-for-yield behaviour, and weakened debt service ability of agricultural households and smaller businesses due to a delayed economic recovery.

The search-for yield behaviour and other long-term imbalances "could accumulate under the prolonged low interest rate environment", the minutes said.

"Some committee members judged that monetary policy easing would provide limited support to the economy and inflation", as the current slowdown of the Thai economy was partly due to global and domestic structural problems, the minutes said.

South-east Asia's second-largest economy grew 0.9 per cent in January-March on the quarter and 3.2 per cent on the year, but the recovery has remained fragile amid soft exports and consumption.

The BOT has forecast economic growth of 3.1 per cent this year, with exports falling for the fourth year running, by 2 per cent. The economy expanded 2.8 per cent last year.

Some committee members were concerned about low global bond yields that could reflect underpricing of risks. "A possible snapback in global bond yields, which could raise Thai bond yields as well, could have adverse impacts on the corporate sector," the minutes said.

The committee next reviews policy on June 22. Most economists expect no policy change for now.

REUTERS