Thailand Central Bank Expected to Hold Policy Rate

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The central bank will be meeting on Wednesday to discuss the potential to raise policy rates. Analysts suggest that the central bank will keep policy rates at their current rate. The bank is not expected to reduce rates further out of fear of adding unnecessary risks to the country’s financial stability.

The Bank of Thailand is closely watching the referendum in Britain on Thursday that will determine if Britain will leave the European Union.

An exit from the European Union is expected to cause severe economic uncertainty and global market volatility.

A poll conducted by Reuters polled 27 economists that all voted that the Bank of Thailand will leave the rate at 1.5% on Wednesday. The rate is just a quarter point above record lows. The last rate change by the bank occurred in April 2015 when the central bank cut rates by 25-basis points.

Government spending and tourism are expected to stimulate the economy, leaving little reason to change interest rates.

Economists assert that the Bank of Thailand has little reason to lower rates even further. Lower rates are unlikely to provide further economic growth, as low rates have done little to spur growth in the economy thus far.

Officials forecast Thailand’s growth to reach 3.1% this year, up from 2.8% last year. Kasikornbank’s head of capital markets Kobsidthi Silpachat says, “A rate cut could come later to help the baht be more competitive for trade and tourism.”

Auto sales increased 16% from a year earlier, which will be a major factor in the bank’s decision to adjust rates or not.

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