The Bank of Thailand’s Monetary Policy Committee have voted to cut the policy interest rate to a record low of 1.25%. In a bid to boost Thailand’s economic growth impetus and support a targeted increase in headline inflation.
The current benchmark interest rate is akin to the same rate adopted during the 2008 global financial crisis.
The Bank of Thailand committee voted for a 25 basis points rate cut. The committee believe the cut will contribute to economic growth. And also support headline inflation to rise toward the target, said the MPC statement.
Two committee members voted to keep the policy rate unchanged. Saying a rate cut would not lend additional support for economic growth.
Since a rate hike in December 2018 the MPC had left the policy interest rate unchanged. This was until the majority of committee members voted for a 25 basis points rate cut in August.
“In deliberating their policy decision, the committee assessed that the Thai economy would expand at a lower rate than previously assessed and further below its potential due to a decline in exports. This has affected employment and domestic demand,” said MPC secretary Titanun Mallikamas. “Headline inflation was projected to be below the lower bound of the inflation target.”
The MPC also supported the relaxation of foreign exchange regulations “to encourage capital outflows. Promoting more balanced capital flows, will alleviate pressures on the baht. This will help the private sector to better manage exchange rate risks,” said Mr Titanun.
The latest rate cut is an attempt to lend support to bolster Thailand’s struggling economic conditions. And also to stem the baht’s strengthening value. The Baht has appreciated by around 8% against the US dollar, Asia Plus Securities told the Bangkok Post.
October’s inflation at 0.11% also helped the Bank of Thailand in deciding to implement further monetary stimulus.
“The Bank of Thailand rate cut is as expected to provide a short-term positive sentiment to rein in the baht appreciation,” said ASP.