Thailand Doesn't Feel Pressure to Join Global Tightening

(Bloomberg) -- Thailand’s central bank left its benchmark interest rate unchanged near a record low, and said it doesn’t feel pressure to join a global wave of tightening that’s swept along some peers in Southeast Asia.

Monetary policy committee members voted unanimously to hold the one-day bond repurchase rate at 1.5 percent, where it’s been since 2015, according to a Bank of Thailand statement on its website on Wednesday. All 23 economists surveyed by Bloomberg predicted the decision. One committee member was unable to attend the meeting, the central bank said.

The cushion of high foreign-exchange reserves makes it possible for the Thai central bank to independently focus its policy on the local economy, Assistant Governor Jaturong Jantarangs said in a briefing in Bangkok.

Four years after the military seized power, the economy remains dependent on exports and tourism and companies are reluctant to invest at home. Strong foreign-reserve buffers and a current-account surplus are helping to shield the nation from emerging-market volatility, giving the central bank scope to skirt a wave of policy tightening as the U.S. raises rates.

Inflation is slowly rebounding with consumer prices rising 1.07 percent in April from a year ago, the fastest pace in 14 months. The central bank retained its forecast for inflation to average 1 percent this year, meeting its goal of 1 percent to 4 percent, Jaturong said.

As central banks in Malaysia and Philippines kick off monetary policy tightening in Southeast Asia, speculation is building on who will follow next. Sixteen of the 29 economists surveyed by Bloomberg predict Indonesia’s central bank will raise its benchmark rate on Thursday.

Click to read about Indonesia’s central bank governor ending his five-year term with a potential rate hike

Other highlights of the Bank of Thailand statement:

• The baht would likely remain volatile
• Core inflation was projected to rise slowly
• Overall financial conditions remained accommodative and conducive to economic growth
• Financial stability remained sound overall, but it was deemed necessary to monitor pockets of risks that might lead to the build-up of vulnerabilities especially given prolonged monetary accommodation

--With assistance from Michael J. Munoz and Ditas Lopez.

To contact the reporter on this story: Suttinee Yuvejwattana in Bangkok at suttinee1@bloomberg.net

To contact the editors responsible for this story: Nasreen Seria at nseria@bloomberg.net, Karl Lester M. Yap, Sunil Jagtiani

©2018 Bloomberg L.P.