Thai central bank maintains policy interest rate at 1.25 percent
The Bank of Thailand (BoT) yesterday decided to keep the key interest rate unchanged at 1.25 percent during the fourth meeting of its Monetary Policy Committee (MPC) this year.
BoT assistant governor Paiboon Kittisrikangwan, who announced the outcome of the Monetary Policy Committee (MPC) meeting, disclosed that the decision to maintain the policy rate at 1.25 percent was mainly due to the uncertainties related to the impact of sovereign debt problems in Europe and the domestic political situation which are still the key risks to Thailand’s growth outlook.
According a statement of the central bank, although the global economic outlook has improved since the last MPC meeting on April 21, with continued growth in the US, Japan and particularly in Asia, sovereign debt problems in some European economies may however dampen the region’s recovery and pose risks to the sustainability of global growth.
The MPC will closely monitor the outcome of measures taken to resolve problems and restore confidence in Europe, said the statement.
The Thai economy, it said, expanded in the first quarter of this year at a stronger pace than anticipated as the economy was driven by strong growth in exports and tourism while the country’s domestic demand, especially private investment, continued to expand. In April, it said, economic activities slowed down somewhat, partly owing to adverse impacts of domestic political situation on tourism as well as confidence of consumers and businesses.
Meanwhile, it said, the inflation remains low at present but is projected to increase in the periods ahead.
The MPC judged that Thailand’s economic fundamentals are robust and should enable the economy to continue growing in the second half of this year but the sovereign debt problems in Europe and domestic political situation remain the key risks to the country’s growth outlook, so the MPC decided to maintain the policy interest rate at 1.25 percent.
Moreover, the BoT assistant governor also added that if the Greek debt crisis and the global economy improve, the MPC may revise its forecast that the Thai economy is likely to grow over 5.8 percent, higher than 4.3-5.8 percent projected earlier.
“The major factor that has support economy growth is export and it is believed it will continue to help drive the economy until next year,” Mr Paiboon said.
If the risk factors ease soon, the next MPC meeting may adjust the interest rate to its normal rate, he added. The MPC is scheduled to meet again on July 14.
Thailand’s policy rate had been lowered from 2.75 to 2.00 percent on January 14 last year and one month later from 2.00 to 1.50 percent on February 25, before being cut by 25 basis points to 1.25 and having been maintained at the rate since then.
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