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Unexpected rate cut Shows Thailand worries

The Bank of Thailand lowered its benchmark interest rate for the first time in nine months to stimulate Thailand’s 2013 economy. BoT’s Monetary Policy Committee MPC voted 5 to 2 to cut the policy interest rate from 3 per cent to 2.75 per cent per annum, effective immediately.

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Bank of Thailand

The Bank of Thailand lowered its benchmark interest rate for the first time in nine months to stimulate Thailand’s 2013 economy. BoT’s Monetary Policy Committee MPC voted 5 to 2 to cut the policy interest rate from 3 per cent to 2.75 per cent per annum, effective immediately.

The overall global economic outlook remained weak

although further monetary policy easing in major economies helped to support global financial market sentiment and latest indicators pointed towards some improvements in US housing and labour markets. Weak global demand had weighed more heavily on Chinese and regional economies than expected.

Bank of Thailand

Weak global demand had weighed more heavily on Chinese and regional economies than expected, says Bank of Thailand to justify rate cut.

Moderate growth in China could dampen exports further

Going forward, a more moderate growth outlook for the Chinese economy could dampen Asian exports further. At the same time, fiscal risks in the US and practical implementation challenges to the resolution of euro debt crisis posed significant risks to the global economic outlook.

The Thai economy continued to expand in the third quarter

although the impact of softer global demand on exports and export production had become more apparent. The MPC assessed that the global economy would gradually improve next year, but the substantial degree of uncertainty surrounding the outlook could hamper exports in the period ahead.

Domestic spending and private investment outlays continued to be robust, though investment moderated as flood-related expenditures tapered off. Credit growth to the private sector remained high and warranted close monitoring, while inflationary pressure stabilised at an acceptable level.

With upside risk to inflation contained

the majority of MPC members deemed that monetary policy easing was warranted to shore up domestic demand in the period ahead and ward off the potential negative impact from the global economy, which remained weak and fragile.

The MPC therefore voted 5 to 2 to reduce the policy rate by 0.25 percent, from 3.00 percent to 2.75 percent per annum, effective immediately. Two members voted to maintain the policy rate at 3.00 percent per annum deeming the current growth momentum to be adequate and that further policy action could await greater clarity in the economic outlook.

Bank of Thailand

 

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