BANGKOK: Thailand’s central bank unexpectedly cut its key interest rate on Wednesday, bringing it to a “neutral” level to support economic growth. This was the first cut since May 2020, after months of government pressure to ease policies.
The rate was reduced by 25 basis points from 2.50% to 2.25%. The bank’s decision surprised many, as only four out of 28 economists expected it. Following the announcement, the stock index rose by 1.6% while the baht fell by 0.36%.
The Bank of Thailand (BOT) emphasized that the lower rate would not hinder debt management, keeping it consistent with economic potential. Assistant Governor Sakkapop Panyanukul clarified that the rate adjustment was not influenced by political pressure.
Deputy Finance Minister Paopoom Rojanasakul stated the cut would support growth and show the alignment of fiscal and monetary policies. Previously, only one policymaker supported a rate cut in August.
Various challenges like floods, competition from cheap imports, and factory closures are affecting the economy. Economists predict more cuts may come, with forecasts suggesting the policy rate could drop to 1.5% by the end of next year.
Alongside this, the BOT raised its 2024 growth forecast slightly to 2.7% and decreased its inflation prediction to 0.5%, below the target of 1% to 3%. A meeting at the end of October will further discuss inflation targets.
($1 = 33.34 baht)
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