MPC unanimously maintains interest rate of 1.5% as expected – Hoonsmart

Mr Thitanan Mallikamat, Secretary of the Monetary Policy Committee (MPC), announced the results of the MPC meeting. On 25 September 2019, the committee unanimously resolved to maintain the policy interest rate at 1.50 percent per year. In making policy decisions, the committee assessed that the Thai economy tends to expand lower than expected from exports that Which results in domestic demand Headline inflation tends to be lower than the lower bound of the inflation target framework. The overall financial condition remained at a relaxed level. Financial stability has been partially maintained. But there are still risk factors that need to be monitored. The MPC believes that a loose monetary policy will help support economic growth and allow inflation to return to its target framework. Therefore, it is advisable to maintain the policy interest rate.

The overall Thai economy tends to expand lower than previously assessed and below the potential level. The export of goods contracted more than estimated according to the trading partner economy and the world trade volume slowed down from The conditions of trade protectionism are becoming more severe and expanding. Including the electronic product cycle that recovered slower than expected The tourism sector tends to slow down. Regarding domestic demand Private consumption tends to slow down due to lower incomes and employment, especially in manufacturing for export. Pressure from high household debt Including the impact from natural disasters Although supported by the government's economic stimulus measures Private investment tends to expand lower than expected.

However, relocating production bases to Thailand and public and private investment projects in infrastructure will help support investments in the next phase. Government spending tends to expand lower than expected. Part of the investment postponement of state-owned enterprises

In this regard, the committee will follow up on foreign risks from the conditions of international trade protectionism. The growth trend of Chinese economy and major industrialized countries that will result in domestic demand And geopolitical risks Including following up on government policies and government spending As well as the progress of investment in important infrastructure and the ongoing effects on private investment

Average headline inflation for the whole year in 2019 is likely to be lower than the target inflation rate from lower-than-expected energy prices following the global economic slowdown. And core inflation tends to slow down as pressure

Regarding the reduced demand, the committee considered that structural changes such as the impact of e-commerce business growth, higher price competition Including the development of technology that reduces production costs Resulting in inflation rising slower than in the past. However, the committee agreed that
Headline inflation is likely to reach the target in 2020, in line with the economic growth trend.

The recent financial conditions were at a relaxed level. Liquidity in the financial system is high, the real interest rate is low. Government bond yields decreased The private sector can continuously raise funds. But loans tend to slow down, both business loans and consumer loans

Regarding the exchange rate, the committee is still concerned about the baht appreciation situation when compared to competing trading partners. Which may affect the economy more when the foreign risk increases Therefore it is advisable to closely monitor the situation of exchange rates and capital flows. Including considering the implementation
More appropriate measures as necessary

The overall financial system is stable. But must also monitor risks that may create fragile financial system stability in the future. The Committee considers that measures taken to stabilize financial systems have been implemented to help manage the accumulation of vulnerabilities in the financial system to a certain extent. But must also monitor the behavior of seeking higher return in the low interest rate situation which may lead to under-risk assessment Debt Behavior and Debt Settlement of Households and SMEs Business, Asset Expansion and Internal Connection of Savings Cooperatives As well as the creation of large corporate debt that may underestimate the risk. The committee considers that measures should be taken to oversee financial institutions. (microprudential) and measures to stabilize the financial system (Macroprudential) appropriately together

However, the committee Will follow the development of economic growth Inflation and financial stability Including various risk factors, especially the impact of the conditions of international trade protectionism closely To carry out the monetary policy in the next phase By using the appropriate policy tools, however, the Thai economy still faces structural problems that affect the ability to compete and the growth trend of the economy in the future. Which must be seriously resolved from all sectors