Thailand Central Bank Unexpectedly Cuts Key Rate
05 Febrero 2020 - 12:13AM
RTTF2
Thailand's central bank slashed its key interest rate
unexpectedly on Wednesday, citing a weaker-than-expected outlook,
partly due to the Wuhan coronavirus outbreak. The Monetary Policy
Committee voted unanimously to cut the policy rate by 25 basis
points to 1.00 percent, the Bank of Thailand said in a statement.
Economists had expected the bank to leave the rate unchanged for a
second policy session in a row.
The key interest rate was last cut in November, by 25 basis
points. "In deliberating their policy decision, the Committee
assessed that the Thai economy would expand at a much lower rate in
2020 than the previous forecast and much further below its
potential due to the coronavirus outbreak, the delayed enactment of
the Annual Budget Expenditure Act, and the drought," the bank said.
"Headline inflation was projected to be below the lower bound of
the inflation target throughout the forecast horizon."
Policymakers assessed that financial stability has turned more
vulnerable due to the prospect of economic slowdown and hence,
there was an urgent need to coordinate monetary and fiscal
measures. A more accommodative monetary policy stance would
alleviate the negative impacts, support liquidity provision and
debt restructuring for businesses and households, the bank said.
The latter two must be urgently implemented, the bank added.
Tourist arrivals are expected to grow at a slower than forecast
rate and exports are forecast to fall. Private consumption is
expected to remain subdued due to moderating household income in
the services, agricultural, and manufacturing sectors as well as by
elevated household debt. Policymakers would continue to monitor the
downside risks from the coronavirus outbreak, the delayed budget
disbursement, and the drought that could be more severe than
previously assessed, together with trade tensions and geopolitical
risks that remained highly uncertain, the bank said.
ING economist Prakash Sakpal expects the bank to cut the key
rate one more time this year.
"We believe the BoT would want to remain ahead of the curve in
its policy response to the evolving situation," Sakpal said.
"If so, another cut at the next meeting in March makes more
sense as a timely, and probably more effective, boost to the
economy."
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