Thai central bank stands pat on rates, no easing seen this year

© Reuters. FILE PHOTO: Thailand's central bank is seen at the Bank of Thailand in Bangkok, Thailand April 26, 2016. REUTERS/Jorge Silva/File Photo/File Photo

By Orathai Sriring and Satawasin Staporncharnchai

BANGKOK (Reuters) -Thailand's central bank left its policy rate unchanged at a record low on Wednesday, saying a relaxation of pandemic curbs and a steady vaccine rollout will help the economic recovery.

Thailand's worst coronavirus outbreak led to tougher restrictions in July and August, but the curbs have since been relaxed https://www.reuters.com/business/healthcare-pharmaceuticals/thailand-allow-local-flights-resume-covid-risk-areas-2021-08-29 and the Southeast Asian country will soon reopen to more vaccinated visitors.

The Bank of Thailand's (BOT) monetary policy committee (MPC)unanimously voted to hold the one-day repurchase rate at 0.50% for an 11th straight meeting after three reductions in 2020 to mitigate the impact of the COVID-19 pandemic.

"The committee viewed that financial measures would be more effective than a further reduction in the policy rate, which was already low," the BOT said in a statement https://www.bot.or.th/English/PressandSpeeches/Press/2021/Pages/n6964.aspx after its policy meeting.

Kobsidthi Silpachai, head of capital markets research of Kasikornbank, expects interest rates to stay unchanged for the foreseeable future as the BOT has emphasised that other measures to support the economy were more effective.

"Further cuts in policy rates are like ... pushing on a string," he said.

The central bank maintained its 2021 economic growth outlook at 0.7%, and said it expected 200,000 foreign tourists this year.

For 2022, it raised its growth outlook to 3.9% from 3.7% forecast in August, and predicted 6 million foreign visitors.

While uncertainties surrounding the economic outlook remained high, "progress on vaccination and earlier-than-expected relaxation of the containment measures would help support the economy in the period ahead," the BOT said.

The economy is likely to hit bottom in the third quarter before gradually recovering, Assistant Governor Titanun Mallikamas told a news conference.

Before the rate decision, the finance minister said monetary policy needed to be kept accommodative and be in step with fiscal policy to support the economy.

Twenty of 23 economists in a Reuters poll had expected the BOT to stay on hold while the others saw a cut.

"We are taking out the rate cut we originally had pencilled in for this year. But the poor state of the economy means rate hikes are a long way off," Capital Economics said in a report.

The BOT recently said it backed the government's increased public debt ceiling https://www.reuters.com/world/asia-pacific/thailand-raises-public-debt-ceiling-fight-covid-19-outbreak-2021-09-20 for more fiscal flexibility to support Southeast Asia's second-largest economy.

The central bank said it would closely monitor the baht. The currency, emerging Asia's worst performer, has depreciated about 11% against the dollar so far this year.