Bank of Thailand maintained its policy rate at 1.50% but warned of looming risks from household debt and U.S. trade policy that could undermine financial stability and hamper growth.
Voting 6-1 to maintain the rate, the central bank's monetary policy committee said the current approach remained conducive to sustaining economic growth and achieving the inflation target range of 1% to 4%. One member voted to raise the policy rate by 0.25 percentage point to 1.75%.
The bank said the Thai economy gained further traction and would achieve higher growth than previously assessed in the previous quarter. It expects GDP growth of 4.1% in both 2018 and 2019, up from the 3.9% expansion in 2017, on the back of robust merchandise exports and tourism. But uncertainties on U.S. trade policies, retaliatory measures from U.S. trading partners and geopolitical risks could cloud the growth outlook, it added.
The bank forecast headline inflation, which stood at 0.7% in 2017, to gradually rise but at a slightly slower pace than previously estimated at 1.0% in 2018 and 1.2% in 2019. Core inflation, which was at 0.6% in 2017, is expected to inch up to 0.7% in 2018 and 0.8% in 2019.
While Thailand's financial position remained sound overall, the central bank identified "pockets of risks" such as the deterioration in debt serviceability of households and small businesses.
"Private consumption growth remained moderate partly because the economic recovery had yet to benefit household income and employment in a broad-based manner while household debt remained elevated," the central bank said. "These issues must be addressed through structural policies."