Central bank keeps rate steady at 2%

Thailand kept its key interest rate unchanged for a second straight meeting as the economy showed signs of a recovery after a military coup ended months of political unrest.

The Bank of Thailand held its one-day bond repurchase rate at 2%, with monetary policy committee members voting unanimously in favor of the decision, it said in Bangkok today. Nineteen of 22 economists in a Bloomberg News survey predicted the move, with three expecting a quarter percentage point cut.

Consumer confidence rose in May for the first time in 14 months after a military coup on May 22 ended months of violent protests. The junta has lifted a curfew, made payments due to more than 800,000 rice farmers, cut diesel prices, and sped up budget spending in a bid to boost economic growth after gross domestic product contracted in the first quarter.

“The need for monetary policy to pick up the fiscal slack has been reduced with the junta placing the economy on the front burner,” Weiwen Ng, a Singapore-based economist at Australia & New Zealand Banking Group Ltd, said before the announcement. “The unlocking of fiscal spending should manifest itself in a V-shaped recovery in the second half, with a pipeline of infrastructure investments materialising after being delayed by the political gridlock.”

Economic growth this year “won’t be high” because of limitations including household debt that will cap consumption, governor Prasarn Trairatvorakul said last week. The current rate is “quite low” and accommodative for a recovery, and expansion will gain momentum next year, he said.

Economic growth this year “won’t be that high” because of limitations including household debt that will cap consumption, Governor Prasarn Trairatvorakul said last week. The current rate is “quite low” and accommodative for a recovery, and expansion will gain momentum next year, he said.

Since taking power, army chief Prayuth Chan-Ocha has handed almost 100 billion baht to about 900,000 rice and rubber growers and pledged to resume government spending on infrastructure projects that have been stalled since the dissolution of parliament in December. The junta lifted an overnight curfew in Bangkok last week, after earlier easing restrictions in the country’s main tourist areas.

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