Thailand central bank holds key interest rate

Bloomberg

The Bank of Thailand kept its benchmark interest rate unchanged for a fifth straight meeting to preserve its limited policy space, while reiterating concerns about a currency rally and lowering its economic growth forecast for next year.
The central bank held the policy rate at 0.5% in a unanimous decision, after cutting by a total of 75 basis points earlier this year, and said it stood ready to use more monetary tools if necessary. Sixteen of 17 economists in a Bloomberg survey predicted the hold, with one expecting a 25-basis point cut.
The bank will “monitor the adequacy of the government measures and various risks, especially the new wave of the domestic outbreak, in deliberating monetary policy going forward,” according to a statement announcing the decision. “Fiscal measures must continue to sustain the economy.”
The Covid-19 pandemic has devastated two of Thailand’s main growth drivers, tourism and trade. The government has responded with a series of stimulus measures, recently approving an additional $1.4 billion expenditure for the first quarter of 2021. A fresh virus outbreak over the weekend has added a new risk to the fragile recovery.
Strength in the baht currency, which has rallied more than 9% from this year’s low in April, has emerged as a key concern as the government seeks to support exports.
Seeking to stem baht gains, the central bank has issued a variety of measures to boost capital outflows, and its dollar purchases pushed foreign reserves to a record $255.8 billion in the week ended on December 11. Thailand recently was added to a US Treasury Department monitoring list over its foreign-exchange intervention. The bank said it may need to consider more measures to rein in the currency.