BANGKOK (REUTERS) - Thailand's central bank cut its benchmark interest for a second time this year on Wednesday (Nov 6), stepping up efforts to bolster its economy as exports will likely take a bigger hit from the US-China trade war.
A strong baht has compounded problems for South-east Asia's second-largest economy as other sectors such as tourism slow. Below-target inflation, risks to financial stability and high household debt have added further pressures on the economy.
The Bank of Thailand's (BOT) monetary policy committee (MPC) voted 5-2 to cut the one-day repurchase rate by 25 basis points to 1.25 per cent, a record low last seen during the global financial crisis.
Two members favoured no policy change.
A slim majority of economists - 15 out of 28 - polled by Reuters had predicted no policy change, while the rest forecast a 25 basis-point cut.
"With weak global demand set to drag on exports, growth is likely to remain subdued," Gareth Leather, senior Asia economist with Capital Economics, said in a note adding that a strong baht was another reason for rates to be cut again.
The baht, Asia's best performing currency this year, has risen 7.2 per cent against the US dollar.
The BOT said it would announce measures to encourage fund outflows to slow the baht's strength later on Wednesday.
Capital Economics expects the central bank will cut once more this cycle, with rates being lowered to just 1 per cent.
In August, the MPC unexpectedly cut the key rate by a quarter point before pausing in September despite downgrading its growth outlook. It said it needed to keep policy room to address future risks.
A month later, the central bank cut its growth forecast for this year to 2.8 per cent from 3.3 per cent, and next year's outlook to 3.3 per cent from 3.7 per cent. Last year's growth was 4.1 per cent. Exports, a key driver of economic growth, was expected shrink 1 per cent this year.
In April-June, Thailand's economy grew just 2.3 per cent, the weakest annual pace in almost five years. Official third-quarter growth data is due on Nov 18.
Headline inflation was just 0.11 per cent in October, the lowest in 28 months and far below the BOT's 1-4 per cent target range.