Bank of Thailand to hold rates, wary of growth risks

* What: Bank of Thailand interest rate decision

* When: Wednesday, Oct. 8, at 2:30 p.m. (0730 GMT)

* Rates seen steady this week and until end-2008 at least

BANGKOK, Oct 6 - The Bank of Thailand (BoT) will probably leave interest rates unchanged on Wednesday after two consecutive increases, a Reuters poll showed, with economists expecting no further rise this year as inflation has fallen back.

All 12 economists in the poll expected the one-day repurchase rate to stay at 3.75 percent on Wednesday.

Inflation has fallen thanks to cheaper oil, petrol subsidies and other government measures such as free public transport for the poor, and the BoT's focus is now on risks to economic growth.

"The BoT is likely to remain patient for now in the face of heightened economic uncertainties," economist David Cohen of Action Economics in Singapore said.

"Perhaps if the Thai economy shows signs of weakening over the next couple of months, it might decide to cut its rate by 25 basis points in December, especially if other central banks are cutting in the face of a global slowdown," he said.

Annual inflation fell to 6.0 percent in September from a 10-year high of 9.2 percent in July.

Core inflation breached the upper end of the central bank's target of 3.5 percent in June and July but had fallen back to 2.6 percent by September.

"The easing in core CPI will be a relief for the central bank, which has been watching out for second-round effects," economist Vishnu Varathan of Forecast Pte said.

"But having said that, there is more data to watch before an all-clear is given on price stability, especially with the fiscal measures distorting the inflation picture," Vishnu said.

Nuchjarin Panarode of Capital Nomura Securities said she expected the BoT to have a "more accommodative tone" and forecast a rate cut in the second quarter of 2009.

Deputy Governor Atchana Waiquamdee said last week that lower inflation would allow the bank's monetary policy to focus on countering risks to economic growth.

Economist Thanomsri Fongarunrung of Phatra Securities urged the BoT not to make hasty rate cuts.

"Keeping domestic interest rates at a reasonably high level will assist the BoT in managing capital flows and exchange rate stability," she said. Forecasts of economists on BoT's 1-day repo policy rate:

Oct 8 At end-2008

Action Economics no change 3.75%

Capital Nomura no change 3.75%

DBS Bank no change 3.75%

Forecast no change 3.75%

Goldman Sachs no change 3.75%

Kasikorn Bank no change 3.75%

Lehman Brothers no change 3.75%

Phatra Securities no change 3.75%

Siam City Research no change 3.75%

SCB Securities no change 3.75%

Stanchart no change 3.75%

Tisco Securities no change 3.75%

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MEDIAN no change 3.75%

HIGH no change 3.75%

LOW no change 3.75% ($1 = 34.36 baht)