The Bank of Thailand (BOT), which already cut its rate in March and April by a total of 50 basis points, said the economy was expected to improve gradually and inflation is expected to pick up i the second half of the year and the risk of deflation remains low.
The BOT acknowledged that its rate cuts this had helped the exchange rate "become more conducive to the economic recovery," but the economy remains subject to downside risks from the global recovery so "monetary policy should continue to be accommodative in order to support the economic recovery."
The Thai baht was largely stable in the first few months of the year but then quickly dropped in response to the BOT's April rate cut. Today the baht was quoted at 33.6 to the U.S. dollar, down 2 percent this year.
Thailand's consumer price inflation rate fell further to minus 1.27 percent in May, the fifth month in a row of deflation, but is expected to rise in the second half of the year as the base effect of last year's fall in oil prices begins to wane along with expected increases in oil and raw food prices.
The BOT targets headline inflation of 2.5 percent, plus/minus 1.5 percentage points and in March forecast 2015 inflation to average 0.2 percent.
Thailand's economy is recovering as the BOT expected, though momentum softened in the first four months of the year due to sluggish private consumption and a continued contraction in exports from the slowdown in Chinese and Asian economies, and a shift in global trade.
However, the BOT expects continued improvement in tourism and increased public investment to help shore up the economy.
Thailand's Gross Domestic Product expanded by a better-than-expected 0.3 percent in the first quarter of this year from the previous quarter for annual growth of 3.0 percent, up from 2.1 percent in the fourth quarter of 2014.
The central bank has said growth this year will miss its previous forecast of 3.8 percent but not by how much. In 2014 the Thai economy grew by only 0.7 percent.
The Bank of Thailand issued the following statement:
"The Committee voted unanimously to maintain the policy rate at 1.50 percent per
annum.
Key considerations for policy deliberation are as follows.
The Thai economy recovered at a pace close to the assessment at the previous meeting. Economic momentum in the first four months of 2015 softened due to sluggish private consumption and continued contraction in exports, as a result of a slowdown in the Chinese and Asian economies and a shift in global trade structure. Nevertheless, increased disbursement of public investment expenditure and continued improvement in tourism helped shore up the economy. In the periods ahead, the economy is projected to improve gradually, but subject to downside risks from slower-than-expected recovery of the global economy, especially China and other Asian economies.
Headline inflation continued to stay in a negative territory due mainly to energy costs and raw food prices. However, it is expected to pick up in the second half of the year as the base effect of high oil prices begins to wane, coupled with expected rises in oil and raw food prices. Meanwhile, core inflation was still positive but declined somewhat owing to subdued demand-side pressure.
Nevertheless, in the Committee’s assessment, the risk of deflation remains low, as consumption continues to increase, while the prices of most goods and services still increase or stay unchanged, and inflation expectations are close to the inflation target.
In deliberating monetary policy, the Committee judged that the conduct of monetary policy has thus far eased monetary conditions, while the direction of exchange rate movement has become more conducive to the economic recovery. Nevertheless, the Thai economy remained subject to downside risks, particularly from the global economy. Therefore, monetary policy stance should continue to be accommodative in order to support the economic recovery.
Going forward, the Committee will closely monitor Thailand’s economic and financial developments, and stand ready to utilize the available policy space appropriately in order to support the ongoing recovery and maintain long-term financial stability. "
www.CentralBankNews.info
Key considerations for policy deliberation are as follows.
The Thai economy recovered at a pace close to the assessment at the previous meeting. Economic momentum in the first four months of 2015 softened due to sluggish private consumption and continued contraction in exports, as a result of a slowdown in the Chinese and Asian economies and a shift in global trade structure. Nevertheless, increased disbursement of public investment expenditure and continued improvement in tourism helped shore up the economy. In the periods ahead, the economy is projected to improve gradually, but subject to downside risks from slower-than-expected recovery of the global economy, especially China and other Asian economies.
Headline inflation continued to stay in a negative territory due mainly to energy costs and raw food prices. However, it is expected to pick up in the second half of the year as the base effect of high oil prices begins to wane, coupled with expected rises in oil and raw food prices. Meanwhile, core inflation was still positive but declined somewhat owing to subdued demand-side pressure.
Nevertheless, in the Committee’s assessment, the risk of deflation remains low, as consumption continues to increase, while the prices of most goods and services still increase or stay unchanged, and inflation expectations are close to the inflation target.
In deliberating monetary policy, the Committee judged that the conduct of monetary policy has thus far eased monetary conditions, while the direction of exchange rate movement has become more conducive to the economic recovery. Nevertheless, the Thai economy remained subject to downside risks, particularly from the global economy. Therefore, monetary policy stance should continue to be accommodative in order to support the economic recovery.
Going forward, the Committee will closely monitor Thailand’s economic and financial developments, and stand ready to utilize the available policy space appropriately in order to support the ongoing recovery and maintain long-term financial stability. "
www.CentralBankNews.info
0 comments:
Post a Comment