Thailand’s central bank unexpectedly cut its benchmark interest rate for a second straight meeting, roiling markets already digesting a reduction in this year’s economic growth forecast.
The Bank of Thailand lowered its one-day bond repurchase rate by a quarter of a percentage point to 1.5 percent yesterday, a move predicted by only two of 20 economists in a Bloomberg survey.
The central bank is using a “strong dose of medicine,” because exports might contract, hurting private investment and consumption, which cannot be offset by a rebound in tourism and government spending, Assistant Governor Mathee Supapongse said.
The Thai Ministry of Finance earlier lowered its forecast for GDP growth this year to 3.7 percent from an earlier estimate of 3.9 percent.
Monetary policy committee members voted five to two in favor of yesterday’s 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 plans to hold a briefing today 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 last year and has struggled to recover, with exports falling for a third month last month and consumer confidence dropping to a nine-month low. The Ministry of Finance yesterday lowered this year’s export growth forecast to 0.2 percent from 1.4 percent.
“Thai exports face limitations this year, because of the uncertainty in the global economic recovery, especially with China’s slowdown,” Krisada Chinavicharana, head of fiscal policy at the Ministry of Finance, said before the decision. “We expect the economy to pick up in the second half, because of government spending.”
Thai consumer prices fell for a third month last month.
The last time Thailand experienced deflation, in 2009, the benchmark rate was at 1.25 percent.
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