The Bank of Thailand may refrain from raising its policy rate

The Bank of Thailand may refrain from raising its policy rate, while maintaining unchanged borrowing costs for a second straight game as the risks to increase the nation's economic recovery.

The central bank will leave its benchmark rate by one-day bond repurchase to 1.75 percent, according to 12 of 17 economists surveyed . The rest expect an increase of a quarter percentage point. The decision is due at 2:30 am in the morning from Bangkok.

Thailand and neighboring Malaysia have paused after raising rates earlier this year, choosing to support growth and rising currency export earnings threaten Asia. Higher borrowing costs would attract capital inflows that have boosted profits in the baht and the central bank will maintain a "flexible" policy, the governor said Prasarn Trairatvorakul November 24.

"The central bank may be able to delay the rate increase as price pressures are not so worrying now, while the latest economic data point of a slowdown," said Somprawin Manprasert, economist at Tisco Securities Co. in Bangkok . "They may need to make a move in the second quarter of next year as the inflation risk will be more evident."

Thailand's economy grew 6.7 percent last quarter, the slowest pace this year, as exports declined and agriculture declined, prompting the government planning agency to predict that the central bank will refrain from raise interest rates next year.

Exports Threatened

The baht has fallen more than 2 percent since reaching a maximum of 13 years of 29.46 a dollar on 10 November. However, the currency of 11 percent increase this year is the biggest gain in Asia outside Japan, led to companies like General Motors, Ford Motor Co. and Siam Cement Pcl strength of the baht that is a threat to exports. Thailand is an exporter of cars, rice and electronics.

The currency lost 0.1 percent to 30.23 per dollar as of 11:24 am Prasarn said yesterday despite the pressure on the baht has subsided for now, capital inflows are still "a phenomenon that we have be careful. "

To reduce pressure on the baht appreciation of capital inflows, the government last month to withdraw a 15 percent exemption from tax for foreign income of domestic bonds. Prasarn said last week the central bank has additional tools you can use, including a financial transactions tax, sometimes called Tobin tax after James Tobin, American economist and Nobel laureate, who first suggested the idea in 1971.

Consumer Confidence

Export growth in Thailand fell to 15.7 percent in October, the slowest pace in a year. manufacturing growth slowed to 6.2 percent last month while consumer confidence fell in October for the first time in six months.

The current account surplus widened to 2.91 billion U.S. dollars in October of $ 2,770,000,000 the previous month, due to a rebound in tourism, the central bank said today.

"The export growth may slow in November and December," said the Bank of Thailand Director Mathea Supapongse today. "We had expected earlier in line with the economic slowdown of trading partners, but do not know the extent of the slowdown, however, as the progress of orders abroad are still good."

Seasonally adjusted GDP, which contracted for the second consecutive quarter in the three months through September, may shrink again in the last three months of 2010 due to the global slowdown, the strong baht and the effect of flooding, according to a study Kasikornbank Pcl unit.

However, the Bank of Thailand may increase the rate of monetary policy this week because the central bank has already taken into account the slowing economy and the baht is not a "one-way bet more," said Sathirathai Santitarn one in Singapore economist at Credit Suisse Group AG.

"Many challenges'

"The central bank should start early to anchor expectations of inflation" because monetary policy takes time to affect the economy, Santitarn said. Inflation will accelerate next year once government subsidies expire, he said.

The central bank has said inflation, which used to guide policy, you can reach the upper end of its target range of up to 3 percent next year. headline inflation slowed to 2.8 percent last month from 3 percent in September due to government subsidies. Core inflation remained at 1.1 percent.

Abhisit Vejjajiva Prime Minister, said last week the nation can not be "complacent" about economic growth because it is facing "many challenges", including global economic uncertainties and politics.

Constitutional Court yesterday said the nation's ruling Democratic Party of the complaints Abhisit embezzled state funds to campaign, helping to avoid becoming the third leader forced from office since the 2007 elections.

The Democratic Party still faces separate charges dissolution of illegally accepted a 258 million baht ($ 8.5 million) donation of TPI Polene Pcl, the nation's third largest cement maker. A guilty verdict in this case could disqualify Abhisit, who took power in 2008 after a court dismissed the ruling party linked to Thaksin Shinawatra, ex-leader.