A Still-Divided Bank of Thailand Policy Committee Cuts its Interest Rate Again

April 29, 2015

A 25-basis point cut in March had been Thailand’s first interest rate change in a year.  The vote, however, had been 4-3 to approve that drop, so analysts were not expecting a follow-up stimulus this soon.  This time, a 5-2 majority approved cutting the interest rate to 1.5%, lowest since June 2010, from 1.75%, and the statement released by officials devotes about as much space to explaining the stance of the dissenting voters as of the majority.

In deliberating monetary policy, most members deemed that monetary policy should be eased further in order to add more support to the economic recovery amid higher downside risks, as well as to anchor inflation expectations at an appropriate level. Two members, however, voted to keep the policy rate unchanged, judging that previous monetary policy actions have contributed to continuing accommodative monetary conditions while the policy space for additional easing is limited. In their view, a recent pickup in fiscal stimulus should help buoy the economy to a certain degree; therefore, the policy rate should be maintained, awaiting clearer assessment of the impact of the policy mix on the economy and financial stability.

The statement observes softer-than-expected domestic demand and warns about increasing “risks of prolonged negative headline inflation and inflation expectation trending downward.”  From November 2011 through March 2014, six 25-basis point interest rate cuts were engineered, reducing such from 3.5% to 2.0%.

Copyright 2015, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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