Thai central bank to hold key rate at record low as policy room limited

BANGKOK: Thailand's central bank is likely to leave its key interest rate unchanged at a record low this week to preserve ammunition and gauge the impact of recent stimulus before providing fresh support to the coronavirus-hit economy, a Reuters poll showed.

The Bank of Thailand (BOT)'s Monetary Policy Committee (MPC) is expected to hold its one-day repurchase rate at 0.50pc for a third straight meeting, according to all 18 economists in a Reuters poll.

Southeast Asia's second-largest economy suffered its biggest contraction in over two decades in the second quarter as the pandemic hit tourism and domestic activity, but the economy has shown sings of improvement since June, helped by public spending and easing coronavirus restrictions..

Outgoing BOT Governor Veerathai Santiprabhob told Reuters in late August that Thailand's limited policy space could only be used in the event of further economic shocks.

Incoming Governor and current MPC member Sethaput Suthiwart-Narueput, who takes over on Oct. 1, is expected to broadly stick to his predecessor's policies.

"We see no monetary moves for the time being as monetary policy must be well coordinated with fiscal policy," said Kobsidthi Silpachai, head of capital market research at Kasikornbank.

The BOT has cut rates by 75 basis points so far this year and provided soft loans and debt relief programmes in targeted measures to soften the blow from the pandemic to the tourism-reliant economy.

The government meanwhile has planned a 1 trillion baht ($32 billion) virus response package.

"We have to balance between the pros and cons of deploying further policy actions, given the limited policy space that we have," Veerathai said in the Reuters interview.

Analysts also predicted the BOT could lower its economic outlook as the country has had no visitors since April due to a travel ban and has been plagued by anti-government protests since mid-July.

The BOT said in July that Thailand's economy had bottomed out in the June quarter, but Veerathai told Reuters the BOT's current forecast for a record 8.1pc contraction this year could be "optimistic".