Thailand Holds Key Rate Amid Market Turmoil, Growth Risks

  • 23 of 24 economists correctly forecast rate unchanged at 1.5%
  • Central bank warns of greater capital flow and FX volatility

Thailand held its key rate for a 12th meeting, preserving its firepower as growth risks mount following the death of King Bhumibol Adulyadej and heightened market turmoil in the aftermath of the U.S. elections.

The Bank of Thailand kept its one-day bond repurchase rate at 1.5 percent, with monetary policy committee members voting unanimously in favor, it said in Bangkok on Wednesday. All but one of the 24 economists surveyed by Bloomberg predicted the decision, with JPMorgan Chase & Co. forecasting a cut.

“The Committee saw the need to preserve policy space given that the Thai economy would still be facing greater uncertainties going forward,” including on the global recovery and the direction of economic policy in advanced nations, the central bank said in a statement.

Policy makers face rising risks following the death of the king, who has served as a pillar of stability in a country that’s had 10 coups during his seven-decade rule. They also have to contend with an emerging-market sell-off after Donald Trump’s shock win in the U.S. presidential election, which sent Thailand’s benchmark SET Index down as much as 1.6 percent on Wednesday.

“Interest rates will probably stay unchanged until next year,” said Santitarn Sathirathai, head of Southeast Asia and India economics and strategy at Credit Suisse Group AG in Singapore. “There’s a lot of room and willingness by the government to use fiscal policy to cap risks to growth. They’ve already started infrastructure projects as well as announced short-term pro-consumption measures.”

Click here to read Veerathai’s comments on slower spending during mourning.

The SET index was 0.5 percent lower as of 3:35 p.m. in Bangkok, while the baht rose 0.1 percent to 34.902 per dollar.

“It’s too soon to assess the impact from the U.S. election as it will take some time for whoever wins the election to elaborate on policies,” Assistant Governor Jaturong Jantarangs told reporters in Bangkok. “Looking ahead, volatility will rise, so we want the private sector to be prepared to cope with volatility in capital movement and foreign exchange.”

Exports rose for a second consecutive month in September. Consumer prices rose 0.34 percent in October from a year earlier, the seventh straight month of gains. The inflation rate will probably rise slowly and may return to the 1 percent to 4 percent target “later than previously projected,” depending on price movements for fresh food and oil, the central bank said in the statement.

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