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Thai central bank cuts policy rate to 1.5 pct

Xinhua, April 29, 2015 Adjust font size:

The Bank of Thailand (BOT), or the Thai central bank, on Wednesday decided to reduce the policy rate by 0.25 percentage point from 1.75 to 1.5 percent per annum with immediate effect.

The Monetary Policy Committee (MPC) voted 5 to 2 to cut the policy rate, with two members voting to maintain it at 1.75 percent, said a statement posted on the bank's website.

This is the second unexpected reduction in less than two months. On March 11, the central bank cut the policy rate by 0.25 percent to 1.75 percent.

The Thai economy is projected to recover at a slower pace than previously assessed, according to the statement which detailed the key considerations for the MPC's policy deliberation.

"The pickup in public investment and positive trend in tourism should help shore up the economy, but could not fully offset the weaker-than-expected exports of goods and private consumption in the first quarter of 2015," it said.

Furthermore, looking ahead, exports of goods are subject to higher downside risks from the slowdown in China, shifting global and regional trade structure as Thailand's major trading partners rely less on imports, and pressure from recent Thai baht appreciation.

The contraction in exports could weigh down private investment and consumption through reduced purchasing power and weaker private confidence, according to the bank.

Inflationary pressure continues to decline broadly in line with softer-than-expected domestic demand, while cost of production, particularly oil price, remains low.

"This development increases the risks of prolonged negative headline inflation and inflation expectation trending downward," the statement said.

During the deliberation, most MPC members deemed that the monetary policy should be eased further in order to add more support to the economic recovery amid higher downside risks, as well as to anchor inflation expectations at an appropriate level, according to the statement.

Two members, however, voted to keep the policy rate unchanged, judging that previous monetary policy actions have contributed to continuing accommodative monetary conditions while the policy space for additional easing is limited. Endi