November 12, 2018 / 9:18 AM / a month ago

Thai central bank seen holding key rate, but hike possible next month: Reuters poll

BANGKOK (Reuters) - Thailand’s central bank is widely expected to leave its key interest rate near a record low on Wednesday, though there was a good chance that the first rate hike in years could come in December, a Reuters survey showed.

FILE PHOTO: The Bank of Thailand logo is pictured in Bangkok, Thailand, August 5, 2016. Picture taken August 5, 2016. REUTERS/Chaiwat Subprasom

Nineteen of 22 economists polled by Reuters predicted the Bank of Thailand (BOT)’s monetary policy committee (MPC) would keep its one-day repurchase rate THCBIR=ECI at 1.50 percent, where it has been since April 2015, just above the all-time low of 1.25 percent.

Three others forecast a quarter-point increase to 1.75 percent, which would be the first hike since August 2011. They said their expectations were influenced by the split vote among MPC members at September’s meeting.

A smaller sample of economists gave short term view on the outlook for interest rates, and that showed strong expectations for a rate hike in December.

Ten of 16 analysts who gave a short-term view predicted a 25 basis-point rise on Dec. 19, the last policy review of the year, while the rest saw no change.

Tim Leelahaphan, economist of Standard Chartered, predicted a rate hike this week, but said “even if a hike does not materialize in November, we expect the MPC to signal a move in December, though this is likely to be data-dependent.”

Sarun Sunansathaporn, economist of Bank of Ayudhya, predicts a rate hike next month as “the factors dragging down economic activity are likely to wane and we expect data to improve significantly later this year”.

Other analysts said a recent drop in exports and factory output was worrying, and could deter the central bank for raising interest rates.

“Recent data weakness not only undermines the government’s optimism on the economy’s growth this year but also dampens the prospects of the central bank tightening policy anytime soon,” said Prakash Sakpal, economist of ING in Singapore.

Thailand’s seniormost policymakers have sounded relatively relaxed over interest rate policy.

Enjoying a hefty current account surplus, Thailand is under no immediate pressure to follow rising U.S. interest rates.

And the annual headline inflation rate has remained inside the central bank’s target range of 1-4 percent for seven consecutive months. It was just 1.23 percent last month.

Last month, BOT Governor Veerathai Santiprabhob said there was no imminent pressure to hike rates and Thailand can retain policy autonomy.

Finance Minister Apisak Tantivorawong has previously said no rate hike was needed this year.

Growth in Southeast Asia’s second-largest economy has picked up but remained heavily reliant on external demand, and exports have slowed while tourism has been hit by falling numbers of Chinese visitors.

Last month, the central bank said growth in the July-September quarter likely slowed from the April-June quarter and it might trim its 2018 export forecast.

The BOT has forecast GDP growth of 4.4 percent this year. Last year’s expansion was 3.9 percent, the best in five years.

Additioanl reporting by Khushboo Mittal BENGALURU; Editing by Simon Cameron-Moore

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