Thailand Doesn’t Feel Pressure to Join Global Tightening


Thailand’s central bank left its benchmark interest rate unchanged near a record low, and said it doesn’t feel pressure to join a global wave of tightening that’s swept along some peers in Southeast Asia.

Monetary policy committee members voted unanimously to hold the one-day bond repurchase rate at 1.5 percent, where it’s been since 2015, according to a Bank of Thailand statement on its website on Wednesday. All 23 economists surveyed by Bloomberg predicted the decision. One committee member was unable to attend the meeting, the central bank said.


The cushion of high foreign-exchange reserves makes it possible for the Thai central bank to independently focus its policy on the local economy, Assistant Governor Jaturong Jantarangs said in a briefing in Bangkok.

Four years after the military seized power, the economy remains dependent on exports and tourism and companies are reluctant to invest at home. Strong foreign-reserve buffers and a current-account surplus are helping to shield the nation from emerging-market volatility, giving the central bank scope to skirt a wave of policy tightening as the U.S. raises rates.


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Inflation is slowly rebounding with consumer prices rising 1.07 percent in April from a year ago, the fastest pace in 14 months. The central bank retained its forecast for inflation to average 1 percent this year, meeting its goal of 1 percent to 4 percent, Jaturong said.

As central banks in Malaysia and Philippines kick off monetary policy tightening in Southeast Asia, speculation is building on who will follow next. Sixteen of the 29 economists surveyed by Bloomberg predict Indonesia’s central bank will raise its benchmark rate on Thursday.


Click to read about Indonesia’s central bank governor ending his five-year term with a potential rate hike

Other highlights of the Bank of Thailand statement:The baht would likely remain volatileCore inflation was projected to rise slowlyOverall financial conditions remained accommodative and conducive to economic growthFinancial stability remained sound overall, but it was deemed necessary to monitor pockets of risks that might lead to the build-up of vulnerabilities especially given prolonged monetary accommodation

What Our Economists Say…
The BOT faces less pressure to join others in tightening policy thanks to sustained upward pressure in the baht. This has kept a lid on price pressures from higher oil prices and headline inflation is likely to remain at the lower end of the 1%-4% target this year and next. Even so, it would appear that the central bank is slowly moving in the direction of a rate hike.

– Tamara Henderson, Bloomberg Economics

— With assistance by Michael J Munoz, and Ditas B Lopez