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Thai central bank holds rates to stimulate economy

11 February 2016 - REUTERS

Thailand’s central bank kept its key interest rate unchanged for the sixth straight meeting, as widely expected, allowing government spending to help revive flagging economic growth.

The Bank of Thailand (BOT) said the current policy rate supports the recovery, and added that monetary policy remained accommodative and the policy space should be preserved.

The Monetary Policy Committee (MPC) unanimously voted to leave the one-day repurchase rate at 1.50 per cent on Wednesday, near a record low of 1.25 per cent reached during the global financial crisis. “The committee judged that monetary policy remained accommodative, and the policy space should be preserved, while being mindful of risks to financial stability,” the MPC said.

It said the Thai economy was projected to expand in 2016 at a rate close to the assessment at the previous meeting, supported mainly by domestic demand.

All 21 economists polled by Reuters had predicted the rate would be held steady as more than a year of falling consumer prices gives policymakers leeway to keep rates low.

The central bank has left the rate unchanged since unexpectedly cutting it in March and April as exports slumped and consumer spending turned tepid.

Faced with stubbornly weak exports at a time of high household debt and low farm prices, the government has stepped up spending and investment plans as well as introduced various stimulus measures to lift growth.

The military junta is hopeful fiscal spending will aid Southeast Asia’s second-largest economy, which has yet to regain traction after the army seized power to end months of political unrest in May 2014.

Public spending continued to be well disbursed, especially capital expenditure excluding subsidies and grants, which jumped 44.1 per cent in December from a year earlier, the BOT said.

The BOT forecast gross domestic product growth of 3.5 per cent this year and 2.8 per cent for 2015. Official 2015 GDP data is due on Feb. 15.

The baht has risen about 0.5 per cent against the dollar this year.