The Bank of Thailand’s Monetary Policy Committee (MPC) voted 5:2 today to cut the key policy rate by 25 basis points, to 2.25% with immediate effect, as the central bank comes under increasing pressure from the government and the private sector to ease borrowing costs to boost the sluggish economy.
The rate cut is the first since May 2020. The rate was increased to 2.5% in September last year.
MPC director Sakkapop Panyanukul said that the majority of the committee agreed that the interest rate cut will ease the debt burden, without affecting the process of reducing household debt in proportion with incomes within the context of slow credit growth, adding that the cut is in line with economic potential.
He also said that the two members who opposed the rate cut believe that the 2.5% interest rate is in line with the economic situation and inflation and would have maintained the capability of monetary policy to cope with future uncertainties.
Thailand’s economic growth rates are projected to be 2.7% this year and 2.9% next, driven mainly by tourism and domestic consumption by the private sector, thanks to the stimulus packages introduced by the government and improving exports, particularly of electronic products.
Inflation rates this year and next are projected to be 0.5% and 1.2% respectively, with a tendency for increased inflation of food and energy prices.
Sakkapop said that the MPC agreed with the central bank’s policy, to encourage financial institutions to help their debtors through refinancing to ease their debt burdens.
