Bank of Thailand leaves rates despite slowing growth, Thai baht falls

The BoT held its benchmark one-day bond repurchase rate at 1.5% in a unanimous decision and in line with expectations.

The Bank of Thailand left its benchmark interest rate unchanged saying the economy will soon start benefiting from the recently announced stimulus measures, weakening the Thai baht further.

The BoT held its benchmark one-day bond repurchase rate at 1.5%, in line with expectations, and the central bank said that the decision was unanimous.

USD/THB jumped to 35.13 from Tuesday's close of 34.96, translating to a 0.48% decline in the baht. The pair had touched as low as 34.73 on 17 march, which made the baht's strongest in 8 months.

The bank said economic growth in Thailand will slow further but as monetary conditions remain sufficiently accommodative.

"Thai economy would probably expand at a lower rate than previously assessed. However, monetary conditions remained accommodative, and the policy space should be preserved. Therefore, the policy rate should be kept on hold at this meeting," announced Jaturong Jantarangs, the secretary of the Monetary Policy Committee.

Analysts said stronger fiscal support will also reduce the requirement for aggressive monetary stimuli as of now.

Prime Minister Prayuth Chan-Ocha's cabinet on Tuesday approved an additional THB70bn ($2bn) support for the housing market, including loans to developers and low-income earners, adding to a series of stimulus measures in recent months aimed at boosting consumption in rural areas.

Governor Veerathai Santiprabhob has said that fiscal policies will do more to boost domestic demand than lower borrowing costs.

"With fiscal policies coming in full force, it's not necessary for the central bank to cut rates further," said Somprawin Manprasert, chief economist at Bangkok-based Bank of Ayudhya Pcl, according to a Bloomberg article.

"Fiscal policies are more effective in this situation and borrowing costs are already low. The economy should improve in the second half, supported by government stimulus measures and infrastructure investments."