For the first time in four years, the Central Bank of Thailand reduced the reference interest rate, aiming to revive the economy when inflation is below target.
On October 16, the Monetary Policy Council of the Central Bank of Thailand suddenly lowered the reference interest rate by 25 basis points (0.25%), to 2.25%. This move was beyond analysts’ predictions. The last time this country adjusted interest rates was May 2020.
For many months, the Thai Government has urged the central bank to lower interest rates to stimulate the economy. Inflation in this country is currently much lower than the target of 1-3%. On average, in the first 8 months of the year, prices here only increased by 0.15%.
People buy things at a street stall in Bangkok (Thailand). Image: Reuters
In the announcement after the meeting, the Central Bank of Thailand predicted that inflation would return to the target area by the end of the year. “The Council believes that a neutral monetary policy stance remains appropriate given the growth and inflation outlook,” the agency explained. However, Governor Sethaput Suthiwartnarueput said that reducing interest rates is unlikely to create a big boost for the economy, which needs structural reforms.
Thai Chamber of Commerce President Sanan Angubolkul said reducing lending interest rates will help businesses ease difficulties caused by high costs and a strong baht. The baht price increased 14% in the third quarter, making the country’s exports expensive compared to rivals.
The Central Bank of Thailand also raised its economic growth forecast for this year from 2.6% to 2.7%. However, next year’s GDP forecast is lowered from 3% to 2.9%. The World Bank (WB) expects this economy to grow 2.4% this year and 3% next year.
Thailand is the latest country to join the global wave of interest rate cuts. The US, UK, European Union (EU), Switzerland, Canada, Philippines… have loosened monetary policy to support the economy. This week, the European Central Bank (ECB) plans to reduce interest rates for the third time since the beginning of the year.
Ha Thu (theo Bangkok Post)