MPC likely to retain policy interest at 1.25%

BANGKOK, 16 April 2010 (NNT) – The Kasikorn Research Center (KResearch) expects the Bank of Thailand’s Monetary Policy Committee (MPC) to retain the policy interest rate at 1.25% during the panel’s meeting on 21 April.

Thailand’s policy interest rate, or the 1-day bilateral repurchase rate, has been standing at 1.25% since the beginning of April 2009 as the government continues to implement lenient financial and monetary policies. The economy has recuperated to an extent that the retention of low-interest policies has become less important.

KResearch reckoned that the domestic political unrest was unlikely to end soon, viewing it as a key threat to the economic expansion, and that the risk of inflation still had limited impacts. Therefore, the center speculated that the MPC would maintain the interest rate at 1.25% during its annual meeting on 21 April 2010 and might consider normalizing it at a later time.

According to KResearch, the political impasse could affect this year’s economy by 0.2-1.5% through the declination of the private sector confidence, the domestic spending slowdown, recessive tourism activities, and the shrinking state spending and investment. The country may see only 3.5% in economic growth if the political conflict is prolonged or turns violent and the government fails to manage the problem smoothly. Otherwise, the center indicated that this year’s GDP would be able to reach 6% as earlier estimated.