Thailand’s central bank sees risks, defies government on interest rates

(Bloomberg) — Thailand’s central bank kept key interest rates unchanged after a surprise cut in October, warning of rising uncertainty ahead as it resisted calls from the government to ease policy further.

The Monetary Policy Committee voted unanimously to hold the one-day repo rate steady at 2.25% at its meeting on Wednesday, a decision expected by 21 of 23 economists polled by Bloomberg. The decision, which had little impact on the baht, came shortly before neighboring Indonesia kept its key interest rate unchanged at 6%.

“We remain neutral and will not apply the brakes or accelerate,” Assistant Governor Sakkapop Panyanukul told a news conference in Bangkok. “In the short term, the economic recovery is still on track, but we see greater risks ahead. ”

The Thai economy said in a statement that the Thai economy faces challenges such as increased competition from external factors and policy uncertainty in major economies, and maintains its forecast for growth of 2.7% in 2024 and 2.9% in 2025.

“The central bank indicated that uncertainty will increase in the period ahead, which may be Referring to President-elect Donald Trump’s return to the White House, she said that despite resisting government pressure this time, more cuts were likely.

Read: Thailand reacts: BOT established, strengthening notions of independence

The central bank defended the current interest rate as “consistent” with the economic outlook and inflation moving towards a target range of 1% to 3%, and said it retained “policy space” amid growing uncertainty. The bank has cut interest rates only once this year despite pressure from the government to lower borrowing costs to stimulate economic growth and ease the burden on borrowers.

The central bank’s decision to keep interest rates unchanged highlighted both positive and negative factors in the economy.

“Tourism and domestic demand remain the main drivers, with electronics and machinery exports also in line with the expected recovery in the global technology cycle,” the report said. “However, the economic recovery remains uneven across sectors. While tourism-related services have improved, ( The recovery of small and medium-sized enterprises (SMEs) and some manufacturing industries is facing the pressure of reduced competitiveness.”

Read: Thailand’s electric car sales will miss target as banks tighten car lending

It also noted that the baht has depreciated against the U.S. dollar since the October meeting due to changes in expectations for U.S. interest rates. The baht held on to a 0.1% loss against the dollar after the rate announcement, while the benchmark stock index reversed gains and traded little changed.

The Bank of Thailand emphasized the importance of maintaining a neutral stance as the economy recovers and inflation slowly rises to its target of 1%-3%. Governor Sethaput Suthiwartnarueput said earlier this month that the central bank will pursue a “prudent” monetary policy to effectively deal with the high degree of uncertainty and unintended consequences facing the global economy.

READ: Bank of Thailand votes unanimously to keep interest rates at 2.25%: History

—With help from Marcus Huang.

(Adds comments from BOT, Bloomberg Economics.)

More stories like this can be found at Bloomberg.com