The Bank of Thailand’s monetary policy committee has cut the repurchase rate by 0.25 percentage points from 2.5% to 2.25% effective immediately, MPC secretary-general Paibul Kittisrikangwan said on Wednesday.
The policy rate had been left unchanged since October 2012.
Mr Paibul said the MPC meeting on Wednesday agreed that pressure from inflation had dropped, while household debt was growing at a slower pace, so the panel could use more flexible monetary policy to help spur recovery from the current economic slowdown.
The MPC voted six to one to cut the key policy rate to 2.25%. Mr Paibul said one member of the panel wanted to keep the rate unchanged to protect the country’s already low savings.
"The economy is now weak. Confidence in politics is also weak and this could affect economic expansion in the future”, he said.
"Therefore, the MPC decided to cut the repurchase rate by 0.25 percentage points to support the economy."
The MPC also slashed its gross domestic product growth projection for 2013 to 3%, from a previous forecast of 3.7%. Estimated GDP growth for 2014 was also lowered from 4.8% to 4%, he added.
The key rate cut came as a surprise after economic agencies forecast that the monetary panel would maintain the 2.5% rate, given ongoing political turmoil and the expected scaling down of quantitative easing measures by the United States, beginning early next year.
Money market observers suggested that the MPC cut the key rate to boost the economy and investor confidence since the government would be unable to implement economic stimulus measures until political conflicts are resolved, delaying its infrastructure development and water resources and flood management mega projects.