Growing political pressure aside, Thailand’s weak economy adds to the case for the central bank to cut interest rates sooner rather than later, according to money managers.
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Thailand’s central bank unexpectedly cut its key interest rate at a policy review on Wednesday, a move long called for by the government as needed to revive a sluggish economy with inflation below target.
The Bank of Thailand’s monetary policy committee voted 5 to 2 to reduce the one-day repurchase rate by 25 basis points to 2.25%, after the rate had been a decade-high of 2.50% since September 2023.
Only four of 28 economists in a Reuters poll had predicted a quarter-point cut this week. Twenty-four economists had expected no policy change.
The previous change in policy was a 25 basis point rate rise in September last year.
The BOT raised its 2024 economic growth forecast to 2.7% from 2.6% seen earlier, and predicted 2.9% growth in 2025, down from the 3.0% previously projected.
The World Bank has forecast the economy will grow 2.4% this year and 3.0% next year.
Southeast Asia’s second-largest economy has lagged regional peers as it faces high household debt and borrowing costs as well as weak exports.
The BOT cut its forecast for 2024 headline inflation to 0.5% from 0.6%, which is below the target range of 1% to 3%.