Thailand’s central bank keeps interest rates unchanged as the baht keeps on rising

Thailand’s central bank has kept its benchmark interest rate at 1.75% as widely expected by analysts, as the baht continues to rise, keeping policy makers upbeat.

Thailand central bank's baht Source: Shutterstock

In a majority vote, the monetary policy committee decided to hold the one-day bond repurchase rate at 1.75%, on Wednesday.

The central bank said, as it continues to monitor economic growth, inflation and financial stability the decision was appropriate.

‘The committee viewed that accommodative monetary policy would remain appropriate in the period ahead,’ The bank said.

Inflation has undershot the central bank’s 1% to 4% target range in the past three months.

Thailand’s baht on the rise

In their decision to keep interest rates unchanged, policy makers took into account the country’s strong currency performance.

The baht has surged more than 4% against the dollar so far this year, making it the best performer in a basket of major Asian currencies.

However, the central bank said the currency will remain “volatile” due to external risks.

Finance minister Apisak Tantivorawong said, an overshooting currency will put export-reliant Thailand at a disadvantage pushing pressure on Thailand’s central bank to control shifts in the baht.

Tantivorawong told reporters last week that the baht's strength is hurting exports of agricultural products.

The baht is currently steady on Thursday at 31.48 against the dollar, appreciating by 3.4% this year.

What’s driving the baht’s advance?

As Asia’s best performing currency this year, the baht has strengthened steadily due to several local and foreign factors, including the country’s account surplus, and inflation, which is at its slowest since 2017.

The country’s account surplus widened to $5billion in December from $1.6 billion in November, beating estimations while inflation remains at 04.% in December.

The finance ministry has said they expect a 4% economic growth in 2019, with exports predicted to climb 4.5 %.

Analysts predict that one the most defining factors strengthening the baht is the prospect that the US-China trade tensions may ease, boosting risk appetite.


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