The Bank of Thailand cut its benchmark interest rate for the second time in three months and said it will ease rules on outflows to curb a surging currency.
Five of the seven Monetary Policy Committee members voted to cut the key rate by a quarter-percentage point to 1.25%, the central bank said in a statement. That matches a record low and was in line with the forecasts of 16 of the 26 economists in a Bloomberg survey.
Officials told reporters in Bangkok that the central bank is worried about the strength of the baht, which may continue to weigh on the economy. The bank will ease rules on outflows and consider further steps to rein in the currency, they said.
The baht extended losses, falling as much as 0.7% to 30.399 per dollar.
Thai authorities are stepping up monetary and fiscal support to spur an economy that’s on course for its weakest growth in five years in 2019. The baht has gained more than 8% against the dollar in the past year, the best performer in emerging markets, curbing exports and tourism in the trade-reliant nation.
Governor Veerathai Santiprabhob said the currency steps announced would address the imbalance in capital flows to make it easier to take money out of the country.
The central bank will take further steps if needed, and will assess the impact of the relaxation of foreign-exchange rules every three months, said Deputy Governor Mathee Supapongse. “We hope the rate cut and the easing of rules on capital outflows will join forces to help weaken the baht,” he told reporters.
Analysts said the measures may have a limited effect on the currency. The baht’s slide “stands a greater chance of being reversed as the currency continues to have a strong backing of a large current surplus, while there is little incremental benefits for the economy” from a small adjustment in the interest rate, said Prakash Sakpal, an economist at ING Groep NV in Singapore.