Thailand Holds Rate a Third Time as Growth Outlook Improves

Thailand kept its key interest rate unchanged for a third straight meeting as spending and consumer confidence improved after a military coup ended months of political unrest.

The Bank of Thailand held its one-day bond repurchase rate at 2 percent, with monetary policy committee members voting unanimously in favor of the decision, it said in Bangkok today. All 22 economists in a Bloomberg News survey predicted the outcome, which extended the pause since a cut in March.

Thailand’s economic growth will improve in the second half of the year as fiscal stimulus spurs domestic consumption, Assistant Governor Paiboon Kittisrikangwan said today. Junta leader Prayuth Chan-Ocha, who seized power on May 22, has paid money due to rice farmers, capped fuel prices and outlined plans for a new government and elections to revive local demand.

“The political situation and the economy have stabilized,” said Tsutomu Soma, department manager of the fixed-income business unit at Rakuten Securities Inc. in Tokyo. “That has obviated the need for the BoT to move at this point, and it may keep rates unchanged this year.”

The baht was little changed at 32.162 against the U.S. dollar as of 3:22 p.m. local time. It has strengthened almost 1 percent so far this quarter, among the best performers in Asia of 11 currencies tracked by Bloomberg. The SET stock index gained 0.1 percent.

‘Much’ Stronger

The finance ministry last week cut its forecast for gross domestic product growth this year to 2 percent after a worse-than-estimated performance in the first quarter. The central bank lowered its estimate to 1.5 percent last month, while saying it expects a “V-shaped” recovery in the second half on rising consumption and government spending.

“The current accommodative monetary policy remains appropriate in supporting economic recovery,” Paiboon said in a statement today. “The policy stance is deemed consistent with long-term financial stability, which should complement the government’s reform efforts to lift the economy’s potential growth.”

Thailand’s economy contracted 0.6 percent in the first three months from a year earlier. Consumer confidence rose for a second month in June, while exports climbed for the first time in four months.

Officials elsewhere in the region have tightened monetary policy in recent weeks, with the Philippines raising its benchmark rate last week to curb inflation risks, while Malaysia increased borrowing costs last month for the first time in more than three years.

Prayuth last week named a 200-member National Legislative Assembly to act as the parliament, and said an interim government will be formed in September. The assembly meets for the first time tomorrow. Second-quarter GDP data are due to be released Aug. 18.

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