Thai central bank maintains policy interest rate at 1.25%

BANGKOK, May 20 (TNA) - Citing low inflation along with a slowdown in some economic indices and larger government budget disbursements, the Bank of Thailand (BoT) Monetary Policy Committee on Wednesday opted to maintain its key interest rate at 1.25 per cent, a senior BoT official said.

BoT deputy governor Atchana Waiquamdee said the Monetary Policy Committee decided to maintain its policy interest rate at 1.25 per cent after having last cut the rate by 25 basis points on April 9 to the present level.

Mrs. Atchana said it is hoped that the low rate could help the country’s economic recovery.

Since last December the Monetary Policy Committee had lowered the rate three times for a combined total of 225 basis points. The highest cut was in December when it slashed interest rates by 100 basis points, the steepest cut since 2000 when Thailand adopted the current inflation targeting policy.

However, Mrs. Atchana noted that Thailand’s commercial bank deposit and lending interest rates fell only 1.96 per cent and 50 per cent respectively from the cut in policy interest rate.

She said there is a wide gap between the real deposit interest rate which now stands at 0.15 per cent compared to 7.05 per cent of real lending interest rate.

Because of the unrealistic spread between deposit and lending rates offered by banks, the central bank will have to wait and see whether its low policy interest rate would have any impact on rates offered by them, Mrs. Atchana said.

The Monetary Policy Committee is ready to introduce more monetary policies to help growth if more negative internal and external factors occur in future, she said.

If domestic political unrest persists, effectiveness of economic policies would be delayed as it will erode local and foreign investor confidence and that of consumers as well, she said.

Other possible negative factors include an outbreak of influenza Type A (H1N1) deadly virus and oil prices.(TNA)