Word Association (2024)

[webfact]

 

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

 

 

[snoop1130]

Thailand Cuts Interest Rate to 2.25% Amid Economic Pressure

 

 

In a pivotal move, the Bank of Thailand's Monetary Policy Committee (MPC) has slashed the key policy rate by 25 basis points, bringing it down to 2.25% effective immediately. This marks the first reduction since May 2020, reversing an increase to 2.5% just last September. The decision, backed by a 5:2 vote, arrives as Thailand grapples with escalating demands from both the government and private sectors to lessen borrowing costs and invigorate a sluggish economy.

 

MPC director Sakkapop Panyanukul explained that the majority of the committee believes this reduction will help alleviate debt burdens while still aligning with the country's aim of keeping household debt manageable amidst slow credit growth. The cut is deemed compatible with the economic potential, reflecting a cautious optimism for future growth.

 

However, the vote was not unanimous. Two members argued that maintaining a 2.5% rate better corresponds with current economic conditions and projected inflation, suggesting it would provide a buffer against uncertain economic challenges ahead.

Looking forward, Thailand's economy is expected to expand at modest rates of 2.7% this year and 2.9% next year. Growth is predominantly fuelled by tourism and increased domestic consumption, with a boost anticipated from government stimulus measures and robust export performance, especially in electronics.

 

Inflation forecasts suggest rates of 0.5% this year and 1.2% next year, with a potential rise in food and energy prices looming. Meanwhile, the central bank is encouraging financial institutions to support debtors through refinancing, aiming to ease financial pressures locally.

 

This bold rate cut underscores the urgent need to stimulate economic activity, amid a landscape of cautious optimism mixed with lingering uncertainties.

 

File photo for reference only

 

-- 2024-10-16