UPDATE 2-Thai c.bank holds fire, rates likely to stay on hold

  • 11/10/2021
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* C.bank keeps key rate at record low 0.5%, as expected * Says economy to grow close to forecasts * Economists expect rates to stay unchanged for some time (Adds comments from briefing, economists) BANGKOK, Nov 10 (Reuters) - Thailand’s central bank left its key interest rate unchanged at a record low on Wednesday, warning that the recovery remains fragile although it has reopened to foreign visitors and is trying to get its vital tourism sector back on track. The Bank of Thailand said inflation may be higher than forecast due to energy prices, but this will likely be temporary. Southeast Asia’s second-largest economy is recovering from the pandemic and there is no inflationary pressure yet. The central bank"s monetary policy committee unanimously voted to hold the one-day repurchase rate at 0.50% for a 12th straight meeting, as expected by all 21 economists in a Reuters poll here. "The Committee assessed that the Thai economy had bottomed out in the third quarter of 2021 and entered the recovery phase following the relaxation of containment measures and the re-opening of the country," the BOT said in a statement here after its policy meeting. But the fragile economic recovery outlook would be subject to uncertainties, it added. Kobsidthi Silpachai, head of capital markets research of Kasikornbank, said the economic output gap between actual and trend remains wide and would take a considerable period to close and to generate demand-pull inflation. “Thus, we do not see any tightening in the next 12 months.” Capital Economics said it expected the key rate to remain at 0.50% until at least the end of 2022, as “with the tourism sector still struggling, the economy is in for a slow recovery”. In efforts to restart tourism, the "Land of Smiles" reopened here to vaccinated visitors without quarantine requirements from Nov. 1 after more than a year of strict entry restrictions. The Thai economy would expand at a pace close to the previous projection for 2021 and 2022 on the back of domestic spending that gradually recovered following the relaxation of containment measures, partially offsetting the adverse impact of higher global energy prices, the BOT said. In September, the BOT forecast economic growth of 0.7% this year and 3.9% next year. Assistant Governor Piti Disyatat told a news conference recent strength in the baht should not affect the country’s exports while capital movements remained normal. The BOT stands ready to handle any financial volatility caused by higher U.S. interest rates, he added. The BOT said the baht was more volatile and it would closely monitor market developments and continue to work on improving the structural issues in the foreign exchange system. ($1 = 33.14 baht) Reporting by Orathai Sriring, Kitiphong Thaichareon and Satawasin Staporncharnchai Editing by Jacqueline Wong

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