Thai Stocks Surge as Bank of Thailand Cuts Interest Rate to 2%

[snoop1130]

File photo for reference only

 

In a move to energize Thailand's economy, the Bank of Thailand lowered its key interest rate by 0.25% on Wednesday, responding to government pleas for economic relief and a weaker baht to enhance exports. The Monetary Policy Committee voted 6-1 in favor of reducing the one-day repurchase rate to 2.00%, citing increased economic risks.

 

Reacting to the decision, Thai stocks saw a midday rise of 1.6%. The baht held steady around 33.70 against the US dollar.

 

The Board's rate decision aligns with one-third of economists' forecasts, while others expected rates to stay flat at their initial 2024 meeting. Last December, the rates were kept unchanged, preceding an unforeseen rate cut in October.

 

"The Thai economy is slowing down, mainly due to issues in the industrial sector and foreign competition," the central bank noted, while highlighting domestic demand and tourism as positives. External trade policies from major economies and structural challenges are also adding pressure.

 

The Thai cabinet had urged a rate cut to control inflation, keeping it within the 1-3% target range. In a statement, the International Monetary Fund also recommended lower rates to ease borrowing costs.

 

 

For 2023, Thailand experienced a low inflation average of 0.4%, the lowest in four years. January saw inflation at 1.3%, and the Ministry of Commerce forecasts a modest increase to an average of 0.8% for the year amidst a slower economic recovery.

 

Economic growth in Thailand was a mere 2.5% last year, falling short of the expected 2.9% and lagging behind neighbors like Indonesia. The central bank attributed low inflation to factors like falling oil prices and strong competition from imported goods, chiefly Chinese.

 

While inflation remains low, it's not considered a sign of deflation, benefiting the cost of living and operating costs. However, inflation could be affected by global oil price trends and domestic energy subsidies.

 

Financial conditions are described as "tight," with credit expansion stabilizing but SME loans in troubled industries shrinking. Consumer credit has decreased due to high household debt, standing at 89% of GDP, one of Asia's highest levels, albeit economists suggest 70% as optimal.

 

The committee emphasized that the rate cut aims to ease financial burdens without jeopardizing long-term financial stability, reported Bangkok Post.

 

-- 2025-02-26

 

 

[Tropicalevo]

51 minutes ago, snoop1130 said:

responding to government pleas for economic relief and a weaker baht to enhance exports.

 

Surely this is not the case.

Multiple stories here on AN in recent weeks/months about how well exports are doing.

The government just want cheap credit so that they can borrow more money to buy votes.

 

Headline from the BP yesterday.

 

Quote

Thai exports up for 7th straight month, surplus with US a concern

 

[mfd101]

13 minutes ago, Tropicalevo said:

a weaker baht to enhance exports

Well, so far the Baht is stronger against the US (0.029678) & the Oz dollars ...

[Purdey]

Where to keep saving safely when the government is determined to create more debtors?

Banks interest so low it is no longer a place to keep money. 

Stock Exchange still poor.

 

[stevenl]

1 hour ago, mfd101 said:

Well, so far the Baht is stronger against the US (0.029678) & the Oz dollars ...

That's because it declined significantly the days before. My guess would be the markets were hoping for a bigger decrease than .25.

[CallumWK]

1 hour ago, Purdey said:

Where to keep saving safely when the government is determined to create more debtors?

Banks interest so low it is no longer a place to keep money. 

Stock Exchange still poor.

 

 

I bought Thai gold bars about 1 month ago, and if I sell them today I have a return of 5%.

Sure it can go down from here, or further up, but I'm sure that over the timespan of a few years I will beat the 2% the bank pays me.

Next week 3 term deposits expire, and they will all be switched to gold bars.