Thailand, New Zealand and India surprise with rate cuts

Three central banks across Asia-Pacific delivered surprise interest rate decisions yesterday as policymakers take aggressive action to counter a worsening global economy.

New Zealand and India led with bigger-than-expected interest rate cuts, while Thailand's 25-point reduction was a surprise to most analysts.

The moves come after the US Federal Reserve lowered rates on July 31 for the first time since 2008 to sustain US economic expansion amid uncertainties.

US President Donald Trump stepped up his assault on the central bank in a series of Wednesday morning tweets that renewed his demand for "bigger and faster" interest rate cuts.

"Our problem is a Federal Reserve that is too proud to admit their mistake of acting too fast and tightening too much (and that I was right!)," he wrote.

Major central banks are grappling with the limits of their defence against the oncoming downturn. The threat of a currency war has also added a fresh headache for the Bank of Japan, bolstering the safe-haven yen and further putting policymakers' inflation goal out of reach.

The Reserve Bank of India lowered its benchmark rate by an unconventional 35 basis points to 5.4 per cent in its fourth cut this year. New Zealand reduced its rate by 50 basis points to 1 per cent; economists had forecast a 25 basis-point reduction. The Bank of Thailand's rate cut was the first in more than four years.

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A version of this article appeared in the print edition of The Straits Times on August 08, 2019, with the headline 'Thailand, New Zealand and India surprise with rate cuts'. Print Edition | Subscribe