Thailand leaves interest rate unchanged amid economy fears



Thailand's central bank on Wednesday left its key interest rate unchanged at 2.25 percent in the face of growing worries about the economic impact of anti-government protests in the capital.

Economic growth has been weaker than expected because of soft domestic demand, according to the Bank of Thailand, which last reduced its benchmark lending rate by 25 basis points in November.

"The ongoing political situation continued to dent private confidence, weighing on (the) overall outlook for growth," it said in a statement after its Monetary Policy Committee voted 4-3 to maintain the policy rate unchanged.

"Exports expanded at a subdued pace, despite signs of recovery in some sectors."

Prime Minister Yingluck Shinawatra is under intense pressure to step down after more than two months of street rallies aimed at ousting her elected government and installing an unelected "people's council".

The demonstrators have staged a self-styled "shutdown" of Bangkok since January 13, erecting roadblocks and rally stages at several main intersections including in the main hotel and shopping districts.

"The ongoing political situation poses risks to growth, but sound economic fundamentals should help the economy weather these short-term risks," the central bank said.

At the same time it hinted that another rate cut could be possible in the future, saying it was "ready to take appropriate actions as warranted".

The government on Tuesday declared a state of emergency to deal with the unrest, a move that is expected to deal another blow to the key tourism industry, even though it has not yet had a significant impact in the city.

The credit rating agency Moody's has lowered its gross domestic product (GDP) growth forecast for Thailand in 2013 to around 3.0 percent, down from 3.7 percent, because of the impact of the protests in the final quarter of the year.

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