BoT expected to keep key policy interest rate low next year

BANGKOK, Dec 15 (TNA) -- The Economic Intelligence Center (EIC) of Siam Commercial Bank expects the Bank of Thailand (BoT) to keep its key policy interest rate low to support economic recovery next year although the Federal Reserve is likely to raise its rate three times next year to respond to the strong economy of the United States. EIC projects that the BoT will maintain its policy rate at 1.50% in 2018. Although the Thai economic growth was at 4.3% in the third quarter of this year, the growth concentrated on the sectors benefiting from external demand including export and tourism sectors. Local demand and especially households’ purchasing power remain weak. This will continue to justify a low policy rate. The Federal Open Market Committee (FOMC) resolved to raise its policy rate by 0.25 percentage points to 1.25-1.50% and planned to make three more rises next year to increase the US policy rate to 2.0-2.25 by the end of next year. EIC believes in the possibility of three rate hikes in the US next year, saying the US economic recovery is clear as the unemployment rate in the US is the lowest in 17 years, consumption and investment in the private sector are growing steadily and tax changes will boost the economy. Besides, the Federal Reserve expects inflation to run faster. According to EIC, the rising policy rate of the US will not have a significant impact on the value of Thai baht and US dollar because investors are already aware of the future increase. (TNA)