REFILE-UPDATE 1-Thai central bank sees less scope for further rate cuts

Tue May 6, 2014 11:11pm EDT

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* Bank of Thailand left rates unchanged at April meeting

* Says policy must support economy during political crisis

* But debt of households, small firms needs monitoring

BANGKOK, May 7 (Reuters) - Monetary policy should remain accommodative in Thailand to help the economy at a time of political crisis although there was less scope for further rate cuts, the central bank said on Wednesday, and it again sounded a warning about household debt.

Its monetary policy committee left the benchmark policy rate at 2.00 percent at a meeting on April 23 after a quarter-point cut at the previous meeting on March 12.

The economy has slumped because of political unrest since November. Anti-government protesters disrupted a general election in February, which was then annulled, and the country is being run by a caretaker government with limited powers.

The Constitutional Court is widely expected to find Prime Minister Yingluck Shinawatra guilty of abuse of power later on Wednesday and she would have to step down.

"The committee deemed prolonged political uncertainties to be the main cause for higher downside risks to growth, while room for further policy accommodation was diminishing," the Bank of Thailand said in minutes of the April meeting published on Wednesday.

It has expressed concern frequently in recent months about the high level of household debt and in the minutes it said the debt-servicing ability of low-income households and small and medium-sized companies needed monitoring as this could deteriorate further because of the economy slowdown.

It has said that growth this year would fall short of its latest forecast of 2.7 percent. In October last year, before the protests flared up, it had forecast 4.8 percent growth for this year.

In the minutes, it said "the economy should be able to resume its normal growth next year".

Despite the debt problems, it said the banking system remained sound, noting banks had raised loan loss provisions and "strengthened their capital buffer".

Financial institutions had tightened credit standards, particularly for personal loans, and offered customers help in servicing their debt, it added. (Reporting by Alan Raybould; Editing by Kim Coghill and Simon Cameron-Moore)

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