Thailand's central bank reduced its policy rate for the first time this year to support domestic demand amid tepid economic growth. The bank also expressed concern over persistent capital inflows to the country.
The benchmark policy rate was cut by 25 basis points to 2.50 percent, with immediate effect. The decision was unanimous.
The Monetary Policy Committee said that it will closely monitor developments in the economy, financial stability risks as well as capital flow situation. The MPC said the bank "stands ready to take appropriate action as warranted."
The central bank's last policy change was in October 2012 when the rate was cut by a quarter point to 2.75 percent. Finance Minister Kittirat Na Ranong has long been calling for an interest rate cut to support the export sector, which is struggling under a strong baht.
The MPC in a statement today said "as inflation remained well within the target, monetary policy has room to further cushion against downside risks to domestic demand." The policymakers also cited "financial stability concerns" for the latest rate move.
On Thailand's economic situation, the MPC said that tepid domestic demand could weigh on overall economic momentum particularly if there was delay in government's infrastructure investment expected to start later this year.
It also noted that exports are subject to downside risks from growth moderation in regional economies, especially China.
The economy expanded 5.3 percent year-on-year in the first quarter of 2013, much slower than in the fourth quarter of 2012, according to the National Economic and Social Development Board. It also revised down the 2013 growth forecast for the economy to 4.2-5.2 percent from previously forecast of 4.5-5.5 percent.
The planning agency said that the delay in global economic and export price recovery, strong currency, high base effect and the fading impact of government's stimulus policies posed downside risk to economic outlook.
The central bank said today that the global economic recovery was slower than expected. Global financial market remained volatile, leading to persistent capital flows into the region and exchange rate volatility, it added.
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