BoT: Benchmark cut to help ease the pain
Published: 17/03/2015 at 06:00 AM
Newspaper section: Business
Last Wednesday's cut in the policy interest rate was aimed at sustaining confidence in borrowing costs, as momentum from the economic recovery could be slower than expected, says the Bank of Thailand.
Central bank spokesman Chirathep Senivongs Na Ayudhya said the move to reduce the benchmark interest rate was intended to shore up confidence for private consumption and investment, as economic growth might drift away from the central bank's target.
"Policies that would help to ease short-term pain from the government's economic reforms must come from the public sector, but what the central bank can do right now is reduce borrowing costs before more fiscal budget is disbursed," Mr Chirathep said.
"We also want to ensure borrowing costs are cheap enough and the timing is suitable for investment."
He said the central bank supported the government's economic reform measures to enhance the long-term sustainability of Thailand's economy.
Mr Chirathep insisted the central bank's Monetary Policy Committee (MPC) was not pressured to lower its policy interest rate.
The MPC voted four to three to cut its rate to 1.75% from 2% last Wednesday because an easing monetary policy should lend greater support to bolstering lacklustre economic conditions.
The rate cut came after the committee estimated this year's economic growth would not reach its 4% forecast.
The baht has weakened by 0.5% since the rate cut, partly because markets had expected the MPC to stand pat.
Markets are waiting for the results of the Federal Open Market Committee meeting in the US today and tomorrow, Mr Chirathep said.
The government's 10-year bond yield dropped to 2.74% from 2.77%, rising for the year in line with the US bond yield.