Thai c.bank cuts key rate as exports under pressure, more easing likely

BANGKOK: Thailand's central bank cut its benchmark interest for a second time this year on Wednesday, stepping up efforts to bolster its economy as exports will likely take a bigger hit from the Sino-U.S. trade war.

A strong baht has compounded problems for Southeast Asia's second-largest economy as other sectors such as tourism slow. Below-target inflation, risks to financial stability and high household debt have added further pressures on the economy.

The Bank of Thailand's (BOT) monetary policy committee (MPC) voted 5-2 to cut the one-day repurchase rate by 25 basis points to 1.25%, a record low last seen during the global financial crisis.

Two members favoured no policy change.

A slim majority of economists - 15 out of 28 - polled by Reuters had predicted no policy change, while the rest forecast a 25 basis-point cut.

"With weak global demand set to drag on exports, growth is likely to remain subdued," Gareth Leather, senior Asia economist with Capital Economics, said in a note adding that a strong baht was another reason for rates to be cut again.

The baht, Asia's best performing currency this year, has risen 7.2% against the U.S. dollar.

The BOT said it would announce measures to encourage fund outflows to slow the baht's strength later on Wednesday.

Capital Economics expects the central bank will cut once more this cycle, with rates being lowered to just 1.0%.

In August, the MPC unexpectedly cut the key rate by a quarter point before pausing in September despite downgrading its growth outlook. It said it needed to keep policy room to address future risks.

A month later the central bank cut its growth forecast for this year to 2.8% from 3.3%, and next year's outlook to 3.3% from 3.7%. Last year's growth was 4.1%. Exports, a key driver of economic growth, was expected shrink 1% this year.

In April-June, Thailand's economy grew just 2.3%, the weakest annual pace in almost five years. Official third-quarter growth data is due on Nov. 18.

Headline inflation was just 0.11% in October, the lowest in 28 months and far below the BOT's 1-4% target range. - Reuters

source https://www.thesundaily.my/business/thai-c-bank-cuts-key-rate-as-exports-under-pressure-more-easing-likely-EK1581886