Thailand's central bank left its benchmark interest rate unchanged at 2 percent on Wednesday, as expected, saying the level is low enough to support the country's "weaker-than-expected" economic recovery. The Bank of Thailand (BOT) said it has set reduced economic forecasts, which will be released December 26. The existing forecasts, made in September, are for 1.5 percent growth this year and 4.8 percent in 2015.
The central bank said it expects inflation to remain low "for a while" and noted that global factors pose higher risks to a recovery for Thai exports. But the BOT said it sees "not much" impact on Thailand from Russia's economic crisis. The rate-hold means Thailand only changed its benchmark rate once in 2014, before the army seized power in May. The cut in March came amid rising political tension and followed a similar one in November 2013
On Wednesday, the monetary policy committee (MPC) voted 5-2 to hold the one-day repurchase rate at 2.0 percent. Both dissenters wanted a 25 basis-point cut. At the last meeting, the vote to hold was 6-1. The MPC indicated disappointment in the level of government spending. "Less-than-expected government spending weighs on private investment as most businesses await the implementation of public investment plans," the MPC said.
Faraz Syed, an economist in Sydney for Moody's Analytics, said Thailand missed the opportunity to cut the rate. As inflation is quite low, there was "an opportunity to decrease the interest rate. Unfortunately they haven't taken the measure this time round, but I think they will remain quite dovish in the future," he said. Krystal Tan, economist with Capital Economics in Singapore, said the BOT "is unlikely to cut interest rates anytime soon as it will want to guard against excessive capital outflows" given the recent sell-off in emerging market assets.
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