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Thai central bank keeps rate steady, trims GDP growth outlook

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Thai central bank keeps rate steady, trims GDP growth outlook

The Bank of Thailand held its key interest rate unchanged and downgraded its growth forecasts due to a slowdown in exports against a backdrop of trade tensions.

In a unanimous decision, the Monetary Policy Committee left the policy rate at 1.50% on Sept. 25, following a surprise cut in August.

The central bank revised its GDP growth forecasts to 2.8% from 3.3% for 2019, and to 3.3% from 3.7% for 2020.

"Merchandise exports contracted more than the previous assessment due to the slowdown of trading partner economies and global trade, which were affected by intensifying trade tensions that could expand to other countries, as well as a prolonged downturn in the electronic cycle," the bank said in a statement.

Headline inflation for this year is projected at 0.8%, down from 1.0% in the bank's previous forecast. The central bank also raised concerns about the baht's appreciation, "which might affect the economy to a larger degree" amid external uncertainties. "The Committee would stand ready to use policy tools as appropriate," the bank said.

Another rate cut before the end of the year is on the cards due to the poor domestic economic outlook and the baht's strength, said Gareth Leather, senior Asia economist at Capital Economics.

"A rate cut should also help guard against the threat of deflation ... The upshot is that inflation worries will not prevent the central bank from cutting again," he said.