Thailand to snub changing policy rate

It is pegged to stay at 2.75%.

According to DBS, the central bank (BoT) is expected to leave the policy rate unchanged at 2.75% at the monetary policy meeting.

Here's more from DBS:

Since the beginning of this year, the central bank (BoT) has cut the policy rate twice (25bps in January and another 25bps in October).

Barring a significant deterioration in the growth outlook, we think that further monetary policy easing is unlikely. Over the last few months, external headwinds have certainly taken a toll on growth with headline GDP dipping to 3% YoY in 3Q.

Recent manufacturing and export data have also been uninspiring as the post-flood pent up demand abated. However, domestic economic indicators are still holding up very well. Private consumption and gross fixed capital formation rose by 6% YoY and 15.5% YoY respectively in 3Q.

Coupled with accelerated government consumption, the domestic economy has been able to offset part of the external drag. High frequency data still point to momentum in the domestic economy.

In particular, loan growth has been robust (accelerating in YoY terms) and further monetary easing may not be needed. Moreover, the rollout of minimum wage hikes across the remaining 70 provinces in early 2013 also bears watching. BoT will be keeping an eye out for rising inflation expectations.

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