Bank of Thailand Cuts Rate by 25 bps

Bank of Thailand decided on November 27th to cut the benchmark interest rate for the second time this year to 2.25 percent, as the current political situation threatens investor confidence and the delay in government spending poses downside risks to growth.

Statement by the Bank of Thailand:

The global economy continued to recover, led by expansion in the major economies, particularly the US. High uncertainty in the outlook for monetary and fiscal policies in the US continues to weigh on global financial market stability. The Chinese economy expanded well across all sectors, while the regional economies continued to grow gradually. Exports of the North Asian economies recovered in tandem with the major and Chinese economies, and at a more robust pace than those of ASEAN peers. 

Growth of the Thai economy in the third quarter of 2013 was weaker than expected from both private and public spending. Recovery in exports has not gained traction. Looking ahead, there are higher downside risks to growth stemming from delay in government investment and fragile private confidence, which could be compounded by ongoing political situation. In addition, exports might not benefit fully from prospective global economic recovery. Inflationary pressure remains subdued, while private credits decelerated in line with the economy. 

The committee judges that the Thai economy is expanding at a lower pace than previously assessed, with greater downside risks compared with the last meeting. Given benign  inflation  outlook  and  moderating  household  credit  growth,  there  is  room  for monetary policy to mitigate downside risks to the economy. The MPC thus voted 6 to 1 to reduce  the  policy  rate  by  0.25  percent,  from  2.50  to  2.25  percent  per  annum,  with immediate effect. One member deemed current monetary policy stance to be sufficiently accommodative, and therefore voted to maintain the policy rate at 2.50 percent per annum.

Bank of Thailand Cuts Rate by 25 bps

Bank of Thailand | Joana Taborda |
11/27/2013 9:22:46 AM