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Financial News: Thailand Cuts Interest Rates On Weaker Economic Outlook

Thailand Cuts Interest Rates On Weaker Economic Outlook

08/07/2019 - 09:27:00 (RTTNews)

(RTTNews) - Thailand's central bank unexpectedly slashed its key interest rate for the first time in over four years, on Wednesday, as it expects growth to be lower than expected, mainly due to weaker demand for the country's exports as the global economy slows.

The Monetary Policy Committee voted 5 to 2 to cut the policy rate by 25 basis points to 1.50 percent, the Bank of Thailand said in a statement. Two members sought to leave the rate unchanged.

Economists had expected the bank to hold the rate steady.

The latest rate cut was the first since April 2015, when it was reduced by 25 basis points to 1.50 percent.

The previous move was a quarter-point hike in December, which was the first since August 2011.

"The Committee assessed that the Thai economy would expand at a lower rate than previously assessed due to a contraction in merchandise exports, which started to affect domestic demand," the bank said.

"Inflation was projected to be lower than the lower bound of the inflation target."

The Thai economy grew 2.8 percent year-on-year, the slowest pace in more than four years, in the first quarter of 2019 as trade wars and global slowdown weighed on exports, driving the government to downgrade the overall growth outlook for the year.

Pockets of risks to financial stability remain that warrant monitoring, the bank said.

"We don't think this is going to be a 'one-and-done' move," ING economist Prakash Sakpal said.

"We don't see any reason why the BoT can't cut rates further, given the economy seems stuck on a low growth-low inflation path."

ING expects the bank to cut the rate once more in the fourth quarter of the year and more trimming further ahead.

Central banks across the world have been busy lowering interest rates, taking a cue from the U.S. Federal Reserve which lowered its federal funds rate by 25 basis points on July 31, the first such move since December 2008.

Earlier on Wednesday, central banks of New Zealand and India cut interest rates. The Philippine central bank is expected to follow suit on Thursday.

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