BANGKOK (Reuters) -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 central bank’s move follows five consecutive meetings where it held rates steady and months of pressure from the government for monetary easing that would align with its fiscal stimulus.
The Bank of Thailand’s (BOT) 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 at a decade-high of 2.5% since September 2023.
The benchmark index rose 1.4% after the surprise cut.
The cut would help ease the debt burden without hindering the process of reducing the household debt-to-GDP ratio, the central bank said in a statement.
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 case for cuts arguably only grew even more over the past few months, in view of the rapid appreciation of the baht,” said Miguel Chanco, chief emerging Asia economist at Pantheon Macroeconomic, who predicts another cut in December.
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% earlier, and predicted 2.9% growth in 2025, down from the 3% previously projected.
The World Bank has forecast the economy will grow 2.4% this year and 3% 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.As of June, Thailand had a 89.6% household-to-GDP ratio, with household debt at 16.3 trillion baht ($488.90 billion), among the highest levels in Asia.
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%.
The next rate review is on Dec. 18.
($1 = 33.3400 baht)