Bank of Thailand trims key rate in surprise move
THAILAND’S central bank unexpectedly cut its benchmark interest rate for a second straight meeting, roiling markets already digesting a reduction in the 2015 economic growth forecast.
The Bank of Thailand lowered its one- day bond repurchase rate by a quarter of a percentage point to 1.5% on Wednesday, a move predicted by only two of 20 economists in a Bloomberg survey. The baht slid as much as 0.6%, and the benchmark SET index fell as much as 1.2%, heading to its lowest close since March 31.
The central bank is using a “strong dose of medicine” because exports may contract, hurting private investment and consumption, which can’t be offset by a rebound in tourism and government spending, Assistant Governor Mathee Supapongse said. The finance ministry earlier lowered its forecast for gross domestic product growth this year to 3.7% from an earlier estimate of 3.9%.
Monetary policy committee members voted five- to- two in favor of the decision, and the central bank said it sees lower-than- estimated inflation and higher risks from the baht’s strength on exports. It said it will hold a briefing on Thursday to issue more rules to accommodate outflows as part of an existing plan. It gave no other details.
The economy expanded at its weakest pace in three years in 2014 and has struggled to recover, with exports falling for a third month in March and consumer confidence dropping to a ninemonth low. The finance ministry lowered the 2015 export growth forecast to 0.2% from 1.4%.
Thai consumer prices fell for a third month in March. The last time Thailand experienced deflation in 2009, the benchmark rate was at 1.25%.
The Thai central bank joined at least 30 global peers in providing monetary stimulus this year after it unexpectedly cut borrowing costs last month. The government’s official forecaster, the National Economic and Social Development Board, last week reiterated its February estimate for the economy to grow 3.5% to 4.5% this year if exports recover. —