BANGKOK: Thailand's central bank is expected to leave its key interest rate unchanged on Wednesday, in its first policy review since the military coup as it waits to see if the junta's spending plans and policies boost the struggling economy.
At the meeting, the central bank is expected to chop its 2014 economic growth forecast - from the 2.7 percent it projected in March - though the revision won't be revealed until June 27.
ING, one of the few firms that expects a rate cut now, said on Tuesday that it thinks the Bank of Thailand (BOT) might slash its growth forecast for this year to only 0.9 percent.
The Thai economy has been battered by political unrest, and there was an on-quarter contraction of 2.1 percent in the first three months of the year.
The army, saying it needed restore order and confidence as well as lift depressed economic activity, seized power on May 22.
The junta has announced measures it hopes will get Southeast Asia's second-biggest economy back on track. Sixteen out of 18 economists polled by Reuters expect the Monetary Policy Committee to keep the one-day repurchase rate steady at 2.0 percent. Two predict a 25 basis-point cut.
The committee cut the rate in March and last November, by 25 basis points each, to help the economy cope with falling demand and a hit to tourism.
In May, the number of visitors was 11 percent lower than a year earlier, though industry executives say June will show an improvement, helped by the lifting of curfews which the army imposed right taking power.
Economists who see no change on Wednesday believe the BOT, before acting, will wait to assess the impact of recent measures aimed at helping the economy.
"The junta's efforts to spur the flagging Thai economy suggest the Bank of Thailand will now be under less pressure to further loosen monetary policy," said Krystal Tan, economist with Capital Economics in Singapore.
"Given domestic financial stability risks and the lingering threat of excessive capital outflows, the BOT is likely to adopt a wait-and see-approach and keep its policy rate on hold," she said. Usara Wilaipich, economist with Standard Chartered Bank in Bangkok, said she believes fresh spending can drive growth and the downward economic cycle "has passed its worst in the first quarter".
She noted that the current policy rate is already negative relative to headline inflation, which inflation rose to a 14-month high of 2.62 percent in May.
Usara said she expects the key interest rate to remain steady all year.
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