Bank of Thailand to remain stubborn on policy rate

The 3% rate will stand pat amid push-and-pull between growth and inflation.

According to DBS, the central bank (BoT) is likely to keep the policy rate at 3.00% at the monetary policy meeting on Wednesday. Essentially, the tug of war between growth and inflation continues.

Here's more from DBS:

In terms of price pressures, there are no immediate problems. Although headline inflation pushed to a six-month high of 3.4% in September from 2.7% in the preceding month, this is due in part to an increase in alcohol and cigarette taxes.

Comparatively, core inflation stayed relatively stable at 1.9% YoY in September from 1.8% in August. Growth risks are tilted to the downside in the immediate term amid lackluster external demand.

The value of electronics exports have also been sliding since the post-flood high in March. In recent months, exports have been propped up by strong vehicle exports, but it is not clear that this trend can be sustained.

Meanwhile, the domestic economy’s growth momentum remains strong amid the authorities’ pro-growth stance. Overheating is not a near-term risk, but could become so in the later months of 2013.