By Suttinee Yuvejwattana
Thailand cut its key interest rate for the first time this year to bolster the economy as prolonged political unrest curbed local demand and hurt tourism.
The Bank of Thailand cut its one-day bond repurchase rate by a quarter of a percentage point to 2 percent, with monetary policy committee members voting four-to-three in favor, it said in Bangkok today. Sixteen of 26 economists in a Bloomberg News survey predicted the decision, with the remainder expecting the rate to be held.
Thai consumer confidence fell to its lowest in more than 12 years in February as anti-government protests persisted for more than four months. Fitch Ratings and Moody’s Investors Service last week warned about risks to the nation’s creditworthiness if the political gridlock continues, and the constitutional court today rejected a 2 trillion baht ($62 billion) infrastructure bill that parliament had approved.
“Although monetary policy can’t solve the government’s issues, political instability has taken a toll on economic growth and the central bank must act,” Matthew Circosta, an economist at Moody’s Analytics in Sydney, said before the decision. “What Thailand needs now is lower rates to boost other sectors in the economy, including consumption and business investment.”
The baht fell 0.2 percent to 32.378 against the dollar as of 3:18 p.m. local time. It has weakened almost 4 percent since demonstrations began Oct. 31, among the worst performers in Asia. The benchmark SET index fell 0.4 percent. Morgan Stanley yesterday downgraded Thai stocks on the decelerating economic growth and political instability.
Read more: Thailand Reduces Key Rate as Political Unrest Hurts Economy