Thailand holds key rate as prospect for future hike rising

Bloomberg

Thailand’s central bank left its benchmark interest rate unchanged near a record low as expected, with the prospect of a future tightening increasing as more
monetary policy committee members dissented.
Five of the seven committee members at the meeting voted to hold the one-day bond repurchase rate at 1.5 percent, where it’s been since 2015, according to the Bank of Thailand’s statement. Two voted for an increase to 1.75 percent, compared to just one in the June and August meetings.
“The committee viewed that the monetary policy should remain accommodative although the need for currently accommodative monetary policy would be gradually reduced,” the central bank said.
Most central banks in Southeast Asia have raised rates this year to help support currencies caught in the contagion sweeping across emerging markets.
While Thailand’s hefty foreign reserves and a current-account surplus have helped to shield the nation against the worst of the volatility, policy makers are laying the groundwork for rate hikes as inflation picks up.
The Bank of Thailand is moving in the direction of rate hikes. While the direction is clear, the timing is less certain. While a hike at the next meeting cannot be ruled out, we think a move later in the year is more likely, says Tamara Henderson of Bloomberg Economics.
Twenty one of 24 economists surveyed by Bloomberg predicted the decision, with three forecasting a quarter-point hike.
Inflation accelerated to 1.62 percent last month, the fastest pace since 2014. The central bank’s target is an annual average inflation rate of 1 percent to 4 percent for this year. The currency is the only gainer against the dollar in Asia this quarter.
The central bank retained its economic growth forecast for this year at 4.4 percent, and at 4.2 percent for 2019. The inflation estimate was kept at 1.1 percent for 2018.