Thailand: Bank of Thailand reduces the one-day repurchase rate by 25 basis points
November 27, 2013
At its 27 November monetary policy meeting, the Bank of Thailand (BoT) announced that it would cut the one-day repurchase rate by 25 basis points, reducing it from 2.50% to 2.25%. The decision came as a surprise to the market, which had expected the one-day repurchase rate to remain at 2.50%. This marks the first time the Bank has decided to cut its repurchase rate in order to stimulate the economy following three consecutive meetings in which it left the rate unchanged.
The decision to cut the one-day repurchase rate comes amid political tensions within the country. Anti-government protests, which started a month ago after the ruling party tried to pass an amnesty bill, could hurt domestic demand and investor confidence. The Monetary Policy Committee (MPC) pointed out that, "there are higher downside risks to growth stemming from delay in government investments and fragile private confidence, which could be compounded by the ongoing political situation." Regarding price developments, the Bank acknowledged that the inflation outlook has improved compared to the outlook at the time of the previous meeting.
Six out of seven members of the MCP voted in favor of cutting the one-day repurchase rate, outvoting the one member who advocated for keeping the repurchase rate on hold.
FocusEconomics Consensus Forecast panelists expect the one-day repurchase rate to end 2013 at 2.92%. In 2014, the panel expects the monetary policy rate to end the year at 3.20%.
Author: Dirina Mançellari, Senior Economist