Thailand's central bank left its key interest rate unchanged for a third straight meeting on Wednesday, resisting repeated calls by the government to lower borrowing costs to help revive Southeast Asia's second-largest economy.
The Bank of Thailand's (BOT) monetary policy committee voted 5-2 to hold the one-day repurchase rate (THCBIR=ECI) at 2.50%, the highest in more than a decade. It had raised the rate by 200 basis points since August 2022 to curb inflation.
"The majority of the committee deems that the current policy interest rate is conducive to safeguarding macro-financial stability, and that the effectiveness of monetary policy on resolving structural impediments is limited," the BOT said in a statement.
Of 26 economists in a Reuters poll, 16 forecast a hold on Wednesday while the other 10 had forecast a quarter-point cut.
The key rate remains neutral and does not hinder growth, Assistant Governor Piti Disyatat told a briefing, but added that rates would be adjusted if the outlook changes.
The BOT lowered its 2024 GDP growth forecast to 2.6% from 2.5%-3.0% seen earlier. However, the government projects 4% growth this year.
The decision came moments after the government secured funding for its signature $13.8 billion handout scheme, which it said would help boost growth to 5% next year.
Prime Minister Srettha Thavisin has repeatedly urged the central bank to cut rates, saying the current level is hurting businesses and investor sentiment and that the economy is in "crisis".
Miguel Chanco, chief emerging Asia economist at Pantheon Macroeconomics, said the PM's stance had done little to budge a central bank keen to maintain its independence.
"We've been expecting the BOT to keep rates higher than necessary for a bit longer, just to demonstrate its independence as an institution amid the government's explicit pleas for cuts as soon as possible."
"Our core belief is that the start of gradual easing is imminent, with GDP growth soft and weakening, and CPI still in outright deflation".
The Thai baht was largely unchanged at 36.31 to the dollar. The baht is one of the worst-performing emerging Asia currencies, having lost nearly 6% since the start of the year.
BOT Governor Sethaput Suthiwartnarueput said last month the central bank must ensure the policy was appropriate for supporting long-term growth while the risk of deflation was low.
Markets expect two rate cuts for the rest of the year starting at the next rate review on June 12.
Some analyst say the case for a rate cut to support the recovery is building, especially as inflation continues trending lower.
"The weak economy will eventually force the central bank to loosen policy, most likely at its next meeting in June," Gareth Leather of Capital Economics said in a note.
Headline consumer inflation has been below the central bank's 1% to 3% target range for nearly a year, driven by energy subsidies.
The central bank said it expects headline inflation to be 0.6% this year versus a previous forecast in February of nearly 1%.
Overall, BOT said tourism and public expenditure were due to improve through 2024, but exports would recover only gradually, in the second half. It slashed 2024 export growth to 2% from 2.6% projected in February.
"Structural impediments, particularly deteriorating competitiveness in the exports and manufacturing sectors, as well as global excess capacity limit the benefits of the global economic recovery on the Thai economy," it said.
