Bank of Thailand waits to gauge success of fiscal efforts Prayuth's government adding funds to boost housing market Share on Facebook Share on Twitter Thailand’s central bank kept its key interest rate unchanged for a seventh straight meeting and said it stands ready to curb volatility in the baht as the country seeks to avoid a fourth straight year of export contraction. The Bank of Thailand held its one-day bond repurchase rate at 1.5 percent, with Monetary Policy Committee members voting unanimously in favor, it said on Wednesday. A stronger currency is hampering Thailand’s recovery, prompting the bank to revise its forecast for exports this year to a 2 percent contraction from an earlier estimate of zero growth. “The MPC viewed that the recent baht strength is not conducive to the economic recovery,� Assistant Governor Jaturong Jantarangs said at a media briefing in Bangkok. “We have tools and are ready to take care of the baht if it fluctuates too much or doesn’t trade in line with economic fundamentals.� The baht fell 0.5 percent to to 35.115 per dollar as of 4:08 p.m. in Bangkok, while the benchmark SET Index of stocks climbed 0.5 percent, poised for its fifth straight daily gain. Nineteen of 20 economists surveyed by Bloomberg News predicted today’s decision, while one forecast a 25 basis-point cut in the key rate. Rural Stimulus Governor Veerathai Santiprabhob has said that fiscal policies will do more to improve domestic demand than lower borrowing costs, and government spending should help boost the economy in the second half. Prime Minister Prayuth Chan-Ocha’s cabinet on Tuesday approved an additional 70 billion baht ($2 billion) to support the housing market, adding to stimulus measures in recent months aimed at boosting consumption in rural areas. “With fiscal policies coming in full force, it’s not necessary for the central bank to cut rates further,� Somprawin Manprasert, chief economist at Bangkok-based Bank of Ayudhya Pcl, said before the decision. “Fiscal policies are more effective in this situation and borrowing costs are already low.� The central bank cut its forecast for economic expansion this year to 3.1 percent from 3.5 percent, while predicting 3.3 percent gross domestic product growth for 2017. The monetary authority is scheduled to release new economic forecasts on March 31. While weaker-than-expected growth and slowing inflation has added to pressure on the central bank to consider further cuts to borrowing costs, “the current rate is supportive enough, so we should preserve policy space,� Jaturong said. “And we need to consider maintaining financial stability. We don’t see risks from that now, but it doesn’t mean it won’t happen in the future.� Comfort Level “The overhanging risk of a cut lingers amidst the BoT’s rhetoric�, which suggests that the baht’s nominal effective exchange rate is “stronger than the BoT’s comfort level and unsupportive to economic recovery,� said Weiwen Ng, an economist at Australia & New Zealand Banking Group Ltd. in Singapore. Finance Minister Apisak Tantivorawong said March 8 the government’s infrastructure investments are on track and the government expects to inject more than 60 billion baht of funds for infrastructure in the second half of this year.

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