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Interest rates stay the same

The Bank of Thailand held interest rates at 3.0 per cent on Wednesday for the second time in 2012 to bolster the nation’s fragile economic recovery from devastating floods, the central bank said.

By Agence France-Presse

Monday 14 May 2012, 11:30AM

The Monetary Policy Committee said its earlier cuts to the benchmark rate – the most recent in January – had aided Thailand’s rebound from last year’s floods, but warned risks remained to the kingdom’s export-driven growth.

The economy suffered a double-digit contraction in the fourth quarter of 2011, the sharpest on record, after the worst floods in half a century pummelled industry.

Official data Tuesday showed inflation rose 2.47 per cent in April from a year earlier, a significantly lower rate than in March, encouraging the interest rate hold.

“Inflationary pressure is manageable so the committee has agreed that the current interest rate is suitable for supporting economic recovery,” Paiboon Kittisrikangwan, the bank’s assistant governor said in a statement.

“So the committee unanimously agreed to keep the policy rate at 3.0 per cent.”

Economists urged the Bank of Thailand to keep rates on hold for the rest of the year, with exports and manufacturing still shrinking following the floods and inflation seemingly under control.

Usara Wilaipich, senior economist for Global Research at Standard Chartered Bank said the pace of recovery had been “generally disappointing”.

“Exports contracted 3.9 per cent and manufacturing production 7.2 per cent year-on-year,” she said.

“We maintain our call for the BoT to hold rates for the rest of this year, as inflation is expected to stay well-contained in 2012.”

There are already signs that she is right. Thai consumer prices rose 2.47 per cent in April from a year earlier, official data showed Tuesday, but the rate of increase was significantly lower than in March after manufacturers shied away from hiking prices.

Inflation eased from a 3.45 per cent gain in March, according to Commerce Ministry Permanent Secretary Yanyong Phuangrach.

“Manufacturers are hesitant to raise their product prices as consumers are still cautious in spending and competition is also high. This resulted in eased inflation in April,” he told Dow Jones Newswires.

Core CPI, which excludes energy and food costs, increased 2.13 per cent year on year or 0.10 per cent on last month.

Thailand’s central bank was tipped to keep its policy rate unchanged when it meets on Wednesday, Yanyong said.

The ministry had kept its inflation forecast for the whole of 2012 at between 3.30 and 3.80 per cent, he added.



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