Thailand Announces Surprise Policy Rate Cut

BANGKOK, Aug 7 (Bernama) – Thailand’s central bank has unexpectedly announced a policy rate cut of 0.25 percentage point to 1.5 per cent -- the country’s first policy rate cut since 2015. In a statement on Wednesday, Bank of Thailand (BoT) said five of the seven members of the Monetary Policy Committee (MPC) present at the meeting voted to cut the policy rate from 1.75 per cent, effectively immediately, while two other members called to maintain the policy rate at 1.75 per cent. MPC secretary Titanun Mallikamas said the committee assessed that Thailand’s economy would expand at a lower rate than previously projected due to the contraction in merchandise exports, which has started to affect domestic demand. He said inflation was projected to be lower than the lower bound of the inflation target. “Overall financial conditions remained accommodative. Financial stability risks have already been addressed to some extent, although there are still pockets of risks that warranted monitoring. “A more accommodative monetary policy stance would contribute to the continuation of economic growth and should support the rise of headline inflation toward target. Most members thus voted to cut the policy rate at this meeting,” he said. However, Titanun noted that two of the MPC members was of the view that the policy rate cut under the already accommodative monetary policy might not lend additional support to economic growth, compared with potentially increased financial stability risks. “Moreover, there was a need to preserve policy space,” he said. On exchange rates, Titanun said the committee expressed concerns over the baht appreciation against trading partner currencies, which might affect the economy to a larger degree amid intensifying trade tensions. “The committee would closely monitor developments in exchange rates and capital flows, as well as assess the necessity of additional appropriate measures,” he said. He said the committee would also continue to closely monitor developments such as economic growth, inflation, financial stability and associated risks, especially the impact from trade tensions, in deliberating on the appropriate monetary policy, going forward. “The Thai economy would continue to face structural problems, which would affect competitiveness and economic growth outlook. This should be firmly addressed by all related parties,” added Titanun. --BERNAMA