December 18, 2017 / 8:15 AM / in 6 months

Thai central bank seen keeping key rate steady as growth quickens: Reuters poll

BANGKOK (Reuters) - Thailand’s central bank is expected to leave its benchmark interest rate near record lows on Wednesday, the year’s final review, as economic growth picks up, inflation is still tame and high household debt remains a worry.

All 14 economists a Reuters poll forecast the Bank of Thailand’s one-day repurchase rate will be kept at 1.50 percent - where it’s been since April 2015 - when its monetary policy committee (MPC) meets on Dec. 20. The rate is a quarter-point above the record low.

The BOT has reiterated that financial conditions and ample liquidity still aid the economy, and has expressed concern about “search-for-yield behaviour” in a prolonged low interest rate environment.

While a strong baht has worried exporters, Thailand’s shipments have been robust this year on improving global demand. The baht has strengthened nearly 10 percent against the dollar this year.

Last week, the BOT said it had acted to slow the baht’s gains, the second most among Asian currencies this year, to soften the impact on business.

“The BOT will likely maintain its relatively accommodative monetary policy stance to support economic growth” amid global and domestic uncertainties, said HSBC economist Jingyang Chen.

Political uncertainty will likely continue to dampen investment sentiment, but an orderly transition to a civilian government might improve Thailand’s growth outlook beyond 2018, she said.

The ruling junta plans elections in November 2018.

(For a graphic of Thai policy rate, CPI and GDP click reut.rs/2CVLqlE)

Despite sluggish domestic demand, Southeast Asia’s second largest economy grew faster than expected in July-September, up 4.3 percent on year and 1.0 percent on quarter, on higher exports and robust tourism.

In September, the BOT raised its growth outlook to 3.8 percent for both 2017 and 2018. It will give new projections on Wednesday.

Don Nakornthab, a senior BOT director, said last month growth could reach 4 percent this year, after 3.2 percent in 2016.

In November, Thailand’s annual headline inflation rate was 0.99 percent, below the central bank’s 1-4 percent target range.

Seven of 10 analysts in the poll who expressed a longer-term view on rates predicted no policy change throughout 2018, while three predicted increases.

Tim Leelahaphan, an economist at Standard Chartered, predicts rate increases of 25 basis points in the third and fourth quarters of 2018, in the wake of solid economic growth.

“Potential rate hikes by other central banks may add pressure to tighten, as the BOT likely cannot afford to lag in hiking,” he said.

Additional reporting by Chinthathip Nanthavong in BANGKOK and Shaloo Shrivastava in BENGALURU; Editing by Richard Borsuk

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