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Thailand Rate Cut Surprises Markets

Thailand Rate Cut Surprises MarketsThailand Rate Cut Surprises Markets

Thailand’s central bank surprised markets by cutting its key interest rate for a second straight meeting on Wednesday, with policymakers under pressure to revive the stumbling economy.

The Bank of Thailand’s monetary policy committee (MPC) voted 5-2 to cut the one-day repurchase rate by 25 basis points to 1.50 percent, confounding expectations for no change in a Reuters poll of economists.

At the last meeting on March 11, the committee also unexpectedly cut the policy rate by 25 basis points, the first rate change in a year, but the vote was a close 4-3.

“It is rather unexpected and signals desperation and strong disagreement with the official forecasts. A cut strongly suggests very low confidence in growth projections and is rather bold ahead of the US Federal Reserve’s decisions,” said Kobsidthi Silpachai, head of capital markets research, at Kasikornbank in Bangkok.

The MPC said in a statement economic growth was weaker than expected and there was a risk consumer prices would fall further. It added that proposed higher government spending would not be able to offset the slide in exports.

The central bank said it would announce measures on capital movements on Thursday.

Earlier on Wednesday, Thailand’s finance ministry trimmed its 2015 growth forecast to 3.7 percent from 3.9 percent, due to sluggish exports. Its export estimate for the year was cut to just 0.2 percent from 1.4 percent.

The baht extended losses to hit 32.75 per dollar, its weakest since March 23 after the announced rate cut.

Financialtribune.com