Thai C Bank Seen Holding Key Rate for Rest of 2017, Despite Strong Baht

Thailand's central bank on Wednesday (16/08) is expected to keep its low benchmark interest rate where it has been more than two years, as inflation is benign and the economy is improving but high levels of household debt remain a worry. (Reuters Photo/Darren Whiteside)

By : Orathai Sriring | on 6:00 AM August 16, 2017
Category : International, SE Asia

Bangkok. Thailand's central bank on Wednesday (16/08) is expected to keep its low benchmark interest rate where it has been more than two years, as inflation is benign and the economy is improving but high levels of household debt remain a worry.

The baht is trading at more than two-year highs against the US dollar. However, that should not prompt a rate cut, as policymakers maintain Thailand's export competitiveness has not been dented by the currency's strength.

All 21 economists surveyed by Reuters forecast that the Bank of Thailand (BOT)'s one-day repurchase rate will be kept at 1.50 percent at Wednesday's monetary policy committee meeting.

The benchmark has been unchanged since a quarter-point cut in April 2015. All 18 analysts in the poll who gave a forecast on end-2017 rates also expected no change then.

"Inflation is low, which means there is no need to hike rates, but equally the economy is enjoying a bit of a rebound, which means no need for further cuts," said Gareth Leather at Capital Economics in Singapore, who sees no policy change for the rest of this year.

In July, headline consumer prices rose just 0.17 percent from a year earlier, well below the BOT's 1-4 percent target range, giving it plenty of room to keep monetary policy loose.

The central bank has said monetary policy still supports Southeast Asia's second-largest economy.

The BOT remains worried about the hunt for yield and household debt. It recently tightened rules on credit cards and unsecured loans, in a bid to battle debt levels that have restrained consumption.

"The property sector may not grow much this year because creating new debt is a challenge," said Nuttaphong Kunakornwong, chief executive officer of property developer SC Asset Corporation.

At its July 5 review, the MPC said policy should remain "accommodative" as domestic demand had yet become broad-based.

The BOT last month raised its 2017 economic growth forecast to 3.5 percent from 3.4 percent, due to stronger exports. Last year's growth was 3.2 percent, below that of regional peers.

Reuters

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