MPC Sees High Economic Downside Risks, Agreeing on Maintaining Policy Rate at 0.50%
Already low policy rate to remain at 0.50% while financial measures are sufficient for economic recovery notes the committee members.
The Thai Monetary Policy Committee (MPC) voted 4 to 2 on keeping the policy rate at 0.50% and extending financial measures to keep the Thai economy afloat, according to an edited release by The Bank of Thailand (BoT) of the meeting minutes of the monetary policy committee meeting held on August 4. The committee viewed that the policy rate was already low while minority votes favored cutting down the policy rate by 0.25 percentage points.
The committee reiterated on containment of the outbreak and ensuring robust inoculation to bring back confidence in economic activities. At the same time, they acknowledged the downside risk on the economic outlook to remain high. Earlier, the regulator cut down the GDP forecast of 2021 to 0.7-1.2% from 1.5-2.5%.
The members of the committee keep vigilant eyes on the development of the foreign exchange market and capital flows given the Thai baht (-33.16) is more volatile and in an upward trend with further chances to depreciate more than the regional currencies. It is important to maintain the stability of the Thai baht at this point to ensure sound business activities.
The recommendation came forward to encourage Thai institution investors to expand their foreign portfolio to facilitate capital outflow to improve capital flow, calming down the Baht movement. They also emphasized that fiscal measures and coordination of the policies among government agencies are crucial to support economic recovery.
