Thailand's central bank has surprised markets with an unexpected decision to cut its key interest rate by 25 basis points, reducing it from 2.5% to 2.25%. The move comes after five consecutive meetings where the rate was held steady, and amid persistent calls from the government for monetary easing to support a sluggish economy.
Despite inflation remaining below target, the decision aims to address the rapid appreciation of the baht and ease the debt burden faced by households.
Economic analysts had not widely predicted this change, with only four out of 28 economists anticipating such a reduction. The shift in policy, which last saw a rate increase in September 2023, is part of a strategy aligned with the government's fiscal stimulus efforts.
The central bank forecast economic growth improving slightly to 2.7% in 2024, and 2.9% in 2025, although the growth is modest compared to regional peers.
Thailand has been grappling with high household debt and borrowing costs alongside weak export figures. As of June, the country's household debt ratio was 89.6% of GDP, one of the highest in Asia. The latest reduction in the interest rate aims to alleviate some financial pressures by lowering debt servicing costs, potentially spurring more consumer spending and investment.
Alongside Thailand, the Philippine central bank also cut its key interest rate by 25 basis points, citing manageable price pressures and aiming to maintain inflation within its 2% to 4% target range. However, the Bank of Indonesia maintained its rates, aligning with analyst predictions.
The unexpected rate cuts in both Thailand and the Philippines reflect broader efforts in Southeast Asia to support economic activity amid challenging global conditions. The impact of these monetary policy decisions will likely unfold over the coming months as markets and consumers adapt to the new financial landscape, reported Thai Newsroom, Reuters.
-- 2024-10-16
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