Thailand’s central bank held its benchmark interest rate after the baht fell to a six-year low, and said the weaker currency helps support an economic recovery, even as risks persist from drought and a slowdown in China.
The Bank of Thailand held its one-day bond repurchase rate at 1.5 percent, with monetary policy committee members voting unanimously, it said in Bangkok on Wednesday. Twenty one economists surveyed by Bloomberg predicted the decision, while two forecast a quarter of a percentage point cut.
The finance ministry last week lowered its forecasts for exports and gross domestic product growth for a third time this year. While the government has pledged the highest proportion of investment in seven years in its budget for the fiscal year starting Oct. 1, the baht fell last week to its weakest level since May 2009 amid speculation U.S. rates will be raised soon.
“The economy is still in a fragile state,” Krystal Tan, a Singapore-based analyst at Capital Economics Ltd., said in a note. “If economic data continue to disappoint in the coming months, monetary policy easing is likely to come back onto the agenda again.”
The baht slipped 0.3 percent to 35.135 against the U.S. dollar as of 2:46 p.m. local time. It is the biggest loser in Asia after the Korean won in the past month. The benchmark stock index climbed 0.5 percent.
A slowing China is hurting exports across the region, while Thailand is also suffering from its worst drought in more than a decade. Inflation has been negative every month this year.
The economy’s recovery is expected to maintain a similar pace to the second quarter for the remainder of the year, the monetary authority said in a statement today. Headline inflation is likely to have bottomed out and will pick up in the second half, it said.
“The monetary policy stance now is accommodative and will continue to be accommodative to support the economy,” Assistant Governor Mathee Supapongse told a news briefing. The central bank “will stand ready to utilize an appropriate mix of available policy tools to support the economic recovery.”
The central bank has decided to lower its economic forecasts and will announce them next month, Mathee said.
The finance ministry last week cut its forecast for GDP growth this year to 3 percent, which would be among the slowest in developing Asia. Exports, which make up the equivalent of more than half the economy, may contract 4 percent, it said.