Thai Central Bank Makes Unexpected Rate Cuts

[Jacob Maslow]

In an unexpected move, the Bank of Thailand cut main interest rates to 1.75% amid a slow economic recovery. This is the first rate cut in a year for the country.

In an unexpected move, Thailand executed an interest-rate cut on Wednesday, lowering its main rate to just 1.75 percent. This is the Bank of Thailand’s first rate cut in one year. The country joins the likes of other central banks who are lowering rates to spur economic growth.

Thailand’s economy has been slow-moving, with 2014 expansion at its slowest pace in three years. The economy continues its slow recovery, and the Bank of Thailand is expected to lower its projected growth from 4 percent in the coming weeks.

Members of the monetary policy committee voted 4-to-3 in favor of the rate cut. Mathee Supapongse, Assistant Governor, stated that the rate cut can help the economy and that the central bank will act to help maintain financial stability and support the recovering economy. He went on to say that planned public investment should be a “key growth driver”.

Thai exports were down for the second straight year in 2014. This is the first time the country has seen such a decline in nearly two decades. The central bank said on Wednesday that the growth slowdown in China poses a higher risk to overseas sales. Consumer prices are also on the decline for a second month.

The Bank of Thailand isn’t the first central bank to cut rates this year. Scores of central banks from India to China have been cutting rates to help support slow growth. In Thailand, demand abroad and at home is on the decline. Government-funded infrastructure projects also failed to pick up as quickly as officials had forecasted.

In a statement yesterday, PM Prayuth Chan-Ocha said cutting rates too quickly will leave the country with no other options if the economy slows further. A slow economic recovery and inflation may lead to more rate cuts in the future, but no reductions have been forecasted by economists as of yet.

-- 2015-03-12

[useronthenet]

No amount of cuts will prevent the slide. EU economy along with it's Euro is losing ground making Thai imports expensive. Tourism already hit by Russia's economy will also take a nosedive (especially next year), when Europeans in particular search for cheaper holidays, prefering to stay in the eurozone instead. China's economy is also slowing down, so the future is certainly not looking too bright for Thailand.

A good start would be to devalue the Thai baht, but I doubt that will happen in the near future, unless things get really bad.

[Strangebrew]

I guess people should listen to me more often expect another drop of .25% next month cause BOT hasn't seen a move toward results they were looking for. 35 to 1 USD by end of next month Pound will show gaining strength while Euro falls lower a major rise of USD by early June.

Edited March 12, 2015 by Strangebrew

[smutcakes]

No doubt the consumer banking racket will not reflect this change on borrowing cost, but i have no doubt the interest on deposits would fall.

They should all be rolled up and arrested for extortion, collusion etc

[trogers]

No amount of cuts will prevent the slide. EU economy along with it's Euro is losing ground making Thai imports expensive. Tourism already hit by Russia's economy will also take a nosedive (especially next year), when Europeans in particular search for cheaper holidays, prefering to stay in the eurozone instead. China's economy is also slowing down, so the future is certainly not looking too bright for Thailand.

A good start would be to devalue the Thai baht, but I doubt that will happen in the near future, unless things get really bad.

The only way a country can force a devaluation of its currency is to print money like crazy, though the US has shown printing more money can cause the currency to rise instead.

[Srikcir]

The only thing unexpected about the rate cut is that it took so long and isn't enough.

In hindsight the Junta maybe should have waited until 2015 to overthrow the government that could be blamed for a collapsed economy. Now people might think the Junta should be responsible.

[trogers]

The only thing unexpected about the rate cut is that it took so long and isn't enough.

In hindsight the Junta maybe should have waited until 2015 to overthrow the government that could be blamed for a collapsed economy. Now people might think the Junta should be responsible.

Nahhhh...More people would have die. The red shirts would have been better armed, and the economy would have crashed through the floor.

And perhaps the country would have taken on more debts.

Edited March 12, 2015 by trogers

[Prbkk]

....long overdue rather than any surprise. Expect another and another after that. A weaker Baht should result and that will be good for everyone. AUD at under 25 now, 18-24 moyths ago was pushing 33

[Xircal]

Hasn't done the euro any good. FX rates this morning are abysmal and I begin to ask myself whether Thailand will soon become too expensive for future holidays.

[Noi657]

I was half expecting the GBP to rise a little today but, nooooo.... Still stuttering at 49

[gregc]

25 central banks have cut rates in 2015. It's a zero-sum currency devaluation game penalising savers and rewarding leveraged speculation. With only the US considering a rate rise this year, the massive USD debt burdens accumulated around the world will become much more difficult to service. It won't end well.

[trogers]

Rates cut would not lead to more borrowings by locals when they have heavy debts to service.

But those with spare cash would buy assets as deposit rates fall. And we would see asset bubbles again. See the events leading up to the US sub-prime bubble.