2014.04.2305:26:00UTC+00Thailand Central Bank Holds Rates Steady

Thailand's central bank left its key interest rate unchanged on Wednesday, after trimming it in the previous month amid the lingering political impasse.

The Monetary Policy Committee of the Bank of Thailand voted 6-1 to leave the main policy rate unchanged at 2 percent, which is the lowest level since December 2010. The decision was in line with economists' expectations.

"The BoT will want to see the impact of earlier rate cuts before making any further moves," Capital Economics Asia Economist Krystal Tan said.

The BoT may also want to guard against capital outflows given the lingering risk of a renewed sell-off in emerging market assets, the economist added. Capital Economics expect interest rates to remain on hold for the rest of the year.

In March, the bank had cut the policy rate by a quarter-basis point, which was the first reduction this year. Previously, the rate was cut in November 2013.

Today, a policymaker sought another quarter-point cut in the policy rate in a bid to sustain policy easing in supporting growth, the bank said.

"The?committee?deems?prolonged?political?uncertainties?to?be?the?main?cause?for?higher?downside?risks?to?growth," the bank said in a statement.

"Financial conditions are accommodative, and are not hindering domestic spending. Current monetary policy remains appropriately supportive of the Thai economic recovery."

The central bank estimated that the Thai economic growth eased more than previously expected due to weaker domestic demand. While private investment and tourism remain hurt by the political crisis, gradual improvement in exports failed to offset the subdued overall growth, it noted.

Looking ahead, the bank expects economic expansion this year to be lower than previous expectations and to be driven largely by exports. The Thai economy grew just 0.6 percent year-on-year in the final three months of 2013.

In March, the central bank trimmed its 2014 economic growth forecast to 2.7 percent from 3 percent. The BoT Governor Prasarn Trairatvorakul said this month that the projection is likely to be revised down again in June, owing to the ongoing political crisis and the government's budget issues.

This month, the World Bank cut the Thai growth forecast for this year to 3 percent from 4.5 percent. The outlook for next was slashed to 4.5 percent from 5 percent.