Thailand Central Bank Holds Key Rate After Five Cuts

Aug 29, 2007 - Thailand's central bank unexpectedly kept its benchmark interest rate unchanged for the first time this year after a U.S. housing-loan crisis caused stocks and the baht to slide.

The Bank of Thailand maintained its one-day bond repurchase rate at 3.25 percent, the central bank said in a statement in Bangkok today. The decision was predicted by five of 15 analysts surveyed by Bloomberg. The others expected a reduction.

The central bank said it refrained from cutting interest rates because of turmoil caused by a crisis in the U.S. housing market. Thai stocks have slumped 9 percent in the past month and the baht has retreated from close to a 10-year high against the dollar as foreign investors pared holdings of riskier assets. Policy makers next meet on Oct 10.

Thailand's junta-installed government has lifted spending and the central bank has reduced rates this year to boost economic growth in the second half of 2007. Consumer confidence may also pick up from a five-year low after the government said it would hold an election in December, returning the nation to democracy after September's coup.

Thailand's economy expanded 4.3 percent in the first quarter from a year earlier, matching the pace of the previous three months. The government expects growth of 4 percent this year, the slowest pace since 2001.

Thailand's government has set Dec. 23 for an election. An elected administration will help bring the nation ``back into the international community'' and restore confidence, Prime Minister Surayud Chulanont said Aug. 27.