Thailand's central bank cuts policy rate amid economic slowdown

BANGKOK, Feb. 26 (Xinhua) -- Thailand's central bank lowered its key interest rate by 25 basis points on Wednesday to better align monetary conditions with the economic and inflationary outlook while addressing increased downside risks.

The Bank of Thailand's monetary policy committee voted 6-1 to reduce the one-day repurchase rate from 2.25 percent to 2 percent, marking its first cut in four months and the lowest level since July 2023.

The Thai economy is projected to grow slower than previously anticipated, primarily due to structural issues in the manufacturing sector and higher risks from the trade policies of major economies, despite support from domestic demand and tourism, the central bank said in a statement.

The Southeast Asian country's headline inflation rose to an eight-month high of 1.32 percent in January, inching up from 1.23 percent a month earlier and remaining within the central bank's target range of 1 percent to 3 percent for the second straight month.

Headline inflation is projected to stabilize at the lower end of the target range owing to supply-side factors, specifically the expected decline in global crude oil prices, as well as structural factors such as intense price competition from imported goods, said secretary of the policy committee Sakkapop Panyanukul.

The inflation rate at this level is not a sign of future deflation but instead helps alleviate high living costs and business expenses, Sakkapop told a news conference.

However, he noted that the outlook for global crude oil prices and potential domestic energy price subsidies could lead to a downside risk of inflation.

Financial conditions remained tight, though loan growth and credit quality showed signs of stabilizing, with retail credit expansion declining on the back of slower income recovery and high debt burdens, the central bank said.

The committee viewed that the lower policy rate would help ease financial conditions without risking long-term financial stability, it said.

The Thai economy grew 2.5 percent in 2024, accelerating from 2 percent in the previous year but below the government target of 2.7 percent. ■