BANGKOK: Thailand’s central bank held its key interest rate unchanged amid optimism that an economic rebound will hold, as South-East Asia’s second largest economy loosens growth-stifling restrictions and virus cases ease.

       The Bank of Thailand voted unanimously yesterday to hold the one-day repurchase rate at a record-low 0.5% for an 11th straight meeting, as predicted by 19 of 22 economists in a Bloomberg survey.

       The other three expected a reduction of 25 basis points (bps), after two members of the rate-setting committee had voted to cut at the August meeting.

       The ramp-up of vaccinations and faster-than-expected easing of restrictions should support the economy the rest of this year and next, assistant governor Titanun Mallikamas said. The economy bottomed in the third quarter and would start to rebound in the final three months of 2021, though uncertainty remains high, he said.

       Thailand is joining other South-East Asian countries in slowly easing pandemic restrictions as it balances virus-containment measures with steps to revive the economy.

       The government has promoted a “living with Covid-19” strategy and ramped up its vaccination campaign, followed by a decision Monday to cut the quarantine period, shorten the nightly curfew and allow more businesses to reopen.

       Thailand reported 9,489 new Covid-19 cases Tuesday, its lowest tally since July 15. About 33% of the population has been vaccinated, up from 18% a month ago.

       The benchmark SET Index of stocks rose as much as 0.4% after the rate announcement, while the baht was little changed after earlier hitting its lowest level in more than four years against the US dollar. The yield on 10-year sovereign bonds was little changed at 1.839%.

       “The surprise was that the decision was unanimous, unlike last month when two policy makers voted for a 25 bps rate cut, which signalled the central bank was moving in the direction of easing...We don’t expect any rate changes this year, but we still would not rule out targeted quantitative easing, with 10-year government yields starting to soar,” said Asean economist Tamara Mast Henderson.

       While the central bank maintained last month’s forecast for economic growth of 0.7% this year, its tone yesterday expressed more optimism.

       The bank said the economy “would expand close to the projection from the previous meeting,” and raised next year’s outlook to 3.9% growth, from the 3.7% it forecast in August. It stood ready to use additional tools if needed, but reiterated that fiscal support would be more effective than cutting the policy rate further. Earlier this month the bank relaxed rules for its low-interest loan programme and boosted incentives for banks to encourage debt restructuring.

       “The weakness of the economy means interest rates are likely to stay low for some time to come,” Gareth Leather, senior Asia economist at Capital Economics Ltd, wrote in a research note after the decision.

       “We are taking out the rate cut we originally had penciled in for this year. But the poor state of the economy means rate hikes are a long way off.”

       Earlier this month the government raised the public debt-to-gross domestic product ratio to 70% from 60% to allow for higher state borrowing to fight the outbreak.

       The Cabinet also approved a public debt management plan for the fiscal year starting Oct 1, which includes 1.34 trillion baht (US$39.7bil or RM166bil) in new borrowing mainly to finance the budget deficit, government investments and virus-related projects. — Bloomberg