Thailand's central bank on Wednesday retained the benchmark policy rate unchanged at 3 percent saying that the heightened global economic risks paused downside risks to the economy's growth prospects.
The Monetary Policy Committee of the Bank of Thailand voted unanimously to maintain the policy rate at 3 percent. In a statement, the committee said it would remain vigilant in monitoring global economic developments and stand ready to take appropriate policy action as warranted.
In the central bank's view, it is appropriate to maintain an accommodative monetary policy stance in order to support a firm recovery of the Thai economy and temper some of the risks coming from the global economy.
The balance of risks for the Thai economy was skewed towards growth rather than inflation, primarily reflecting heightened global economic risks stemming from uncertainty surrounding the European crisis, it said.
The positive growth momentum in the economy is expected to be sustained going forward on the back of accommodative monetary conditions, robust private loan growth, and the implementation of government stimulus measures. However, the bank warned that "should the Eurozone crisis intensify, the slower export growth could act as a drag on the economic recovery."
The MPC observed that inflationary pressures persisted in the economy, despite some easing in the recent months. Also, inflation expectation remained elevated in light of the minimum wage hike and the energy price structure reform, it noted.
The MPC assessed that risks to global economy have increased relative to the previous meeting, due mainly to heightened uncertainty about the future of Greece in the Eurozone and banking problems in Spain.
As a result, the contraction of the Eurozone economy will be more protracted than previously anticipated, and this could have repercussions on the U.S. economic recovery as well as on Asia, the bank said.
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