Thai central bank surprisingly cuts rates in bid to lift growth

[BANGKOK] Thailand's central bank unexpectedly cut its benchmark interest rate by 25 basis points to 1.75 per cent on Wednesday, in a bid to spark the stubbornly sluggish economy.

The surprise cut - the first rate change in a year - was expected by only five of 21 analysts in a Reuters poll.

Thailand's monetary policy committee voted 4-3 to cut the one-day repurchase rate. At its previous meeting in January, the vote to hold was 5-2 vote.

With the cut, Thailand joins others in Asia in easing policy this year as its economy struggles to gain traction.

In 2015, India has cut rates twice and China has also eased two times, with one cut and one reduction in reserve requirements. Singapore, Australia and Indonesia have also eased.

The central banks of New Zealand and South Korea hold meetings on Thursday. Both are expected to hold, though Korea seen possibly cutting in April.

The Thai central bank said 2015 economic growth is likely to below its 4 per cent forecast.

Thailand's military-led government, which took power in May, has struggled to get the economy back on track as the country's two main growth engines - exports and domestic demand - remain stalled, and public investment spending has been slow.

Prime Minister General Prayuth Chan-ocha said on Tuesday the central bank should not rush to cut rates at this point as it might not leave it with enough policy room to tackle any economic problems.

Benjamin Shatil, senior economist with JP Morgan in Singapore, said he was "skeptical the rate cut will provide a large boost to growth, but it should support sentiment in coming months. We continue to think that fiscal stimulus will be the more important driver of growth this year."

REUTERS