Thai Central Bank Seen Keeping Rates Steady Despite Calls for Cut

Thailand's central bank is expected to keep its benchmark interest rate unchanged near record lows on Wednesday (27/09), despite calls for a cut to contain the strength of the baht. (Reuters Photo/Jorge Silva)

Bangkok. Thailand's central bank is expected to keep its benchmark interest rate unchanged near record lows on Wednesday (27/09), despite calls for a cut to contain the strength of the baht.

The central bank has said monetary policy still supports the country's economic recovery. Though inflation has remained weak, high household debt is limiting its room to lower borrowing costs further.

The baht has risen over 8 percent against the dollar so far this year, the most among Asian currencies.

So far, exports seem to have weathered the stronger currency, with August shipments jumping 13.2 percent on-year, but the government is worried that exports and economic growth could take a hit in 2018 if the baht continues to climb.

All but one of 22 economists in the poll forecast the Bank of Thailand (BOT)'s one-day repurchase rate will be kept at 1.50 percent, where it has been since April 2015, when its monetary policy committee meets on Sept. 27.

One predicted a 25 basis-point cut, citing a need to curb the baht's appreciation to preserve export competitiveness.

The finance ministry and business groups have called on the central bank to cut rates further for the same reasons.

Annual headline consumer prices rose just 0.32 percent in August, below the BOT's 1-4 percent target range. The BOT has said that has been driven by supply-side factors.

All but one of 13 analysts in the poll who gave a view on year-end rates expected no change for the rest of 2017.

Growth in Southeast Asia's second-largest economy has picked up but still lags regional peers. The BOT predicts 2017 growth of 3.5 percent after last year's 3.2 percent.

It may upgrade that forecast on Wednesday following stronger-than-expected GDP data in April-June.

Reuters

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