The prospect that political unrest will dent the Thai economy forced the Bank of Thailand to cut its benchmark interest rate on Wednesday.
The BoT cut the policy rate by a quarter point to 2 per cent, as widely anticipated.
The central bank cited “prolonged political uncertainties” that will impede private consumption, investment, and tourism, though it said exports should gradually improve.
The central had kept rates steady at its January meeting, but by a narrow 4-3 vote. Today’s decision to cut rates was also a 4-3 decision.
With inflation running below a 2 per cent annual rate last month, economists correctly assumed the BoT had the ammunition to help stimulate the economy amid ongoing protests.
Prior to the decision economists at HSBC wrote:
With the caretaker government’s hands bound with regards to new spending, it is now solely up to the central bank to step up to the plate and mitigate further downside risks to the economy as best as it can.
The BoT noted in its statement:
Core inflation has edged up, but remains subdued. Monetary policy has some scope to ease, in order to lend more support to the economy and ensure continuous financial accommodation
