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Bank of Thailand holds interest rate as election risks mount
[BANGKOK] The Bank of Thailand left its benchmark interest rate unchanged on Wednesday, as expected, providing policy stability to investors days before the nation's first election since a military coup five years ago.
The Monetary Policy Committee voted unanimously to hold its policy rate at 1.75 per cent, the Bank of Thailand said in a statement on Wednesday. All 21 economists surveyed by Bloomberg predicted the decision.
The MPC "viewed that the current accommodation monetary policy stance had contributed to the continuation of economic growth and was appropriate given the inflation target," it said in a statement.
Thailand's central bank hiked rates by 25 basis points in December, joining peers in the region in tightening monetary policy as US rates rose. With the Federal Reserve now turning more cautious on rate hikes and inflation risks subsiding across Southeast Asia, central banks are adopting a wait-and-see approach on future moves
While the MPC flagged the possibility of another interest-rate increase last month, policy makers are proceeding slowly. Don Nakornthab, a senior director at the BoT, said last week the shift away from policy tightening globally is making it more difficult for the central bank to hike rates, while an MPC member said in an interview the odds of another rate hike were low
Inflation remains subdued at under 1 per cent, below the central bank's 1 per cent to 4 per cent target band
Uncertainty about the outcome of the March 24 election is rising. Foreign investors have pulled out about a net US$700 million from the nation's stock and bond markets so far this year, while the benchmark SET index has underperformed peers in the Asia Pacific in that period
The baht gained 2.6 per cent against the dollar so far this year, the best performer in Asia, underpinned by the country's large current account surplus and substantial reserve cushion. Going forward, the currency will be "volatile from both internal and external risks," the central bank said, adding the MPC will monitor the foreign exchange situation and its impact on the economy
Policy decisions will remain "data dependent," the BoT said. The MPC will "continue to monitor fragilities in the financial system," it said
The BoT lowered its economic growth projection for this year to 3.8 per cent from 4 per cent, and forecasts expansion of 3.9 per cent in 2020; it also lowered estimates for core inflation to 0.8 per cent from 0.9 per cent.