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Thailand cuts interest rates to boost domestic demand | Thailand cuts interest rates to boost domestic demand |
(35 minutes later) | |
Thailand's central bank has unexpectedly cut interest rates in an effort to boost domestic demand and sustain growth. | Thailand's central bank has unexpectedly cut interest rates in an effort to boost domestic demand and sustain growth. |
The Bank of Thailand (BoT) cut its key lending rate to 2.75% from 3%. | The Bank of Thailand (BoT) cut its key lending rate to 2.75% from 3%. |
There have been fears that the global economic slowdown may hurt demand for the country's exports and harm its economic growth. | There have been fears that the global economic slowdown may hurt demand for the country's exports and harm its economic growth. |
However, some analysts criticised the move, saying that lower borrowing costs might spur a rise in consumer prices. | However, some analysts criticised the move, saying that lower borrowing costs might spur a rise in consumer prices. |
They said that domestic demand had been strong in recent times and a cut in interest rates was needed at the moment, not least because Thailand's economy had been growing steadily. | They said that domestic demand had been strong in recent times and a cut in interest rates was needed at the moment, not least because Thailand's economy had been growing steadily. |
Thailand's economy grew by a more-than-forecast 3.3% in the April-to-June period, as compared with the previous three months. | Thailand's economy grew by a more-than-forecast 3.3% in the April-to-June period, as compared with the previous three months. |
"We are more concerned than most about the inflation outlook, in particular the feed-through from what has been a fairly prolonged period of above-trend domestic demand," said Robert Prior-Wandesforde, director of Asian economics research at Credit Suisse. | "We are more concerned than most about the inflation outlook, in particular the feed-through from what has been a fairly prolonged period of above-trend domestic demand," said Robert Prior-Wandesforde, director of Asian economics research at Credit Suisse. |
'Reverse the move' | |
Thailand has also introduced other measures to boost domestic consumption in recent times. | |
It has raised minimum wages in various parts of the country, in some areas by as much as 40%. | |
The government has also announced plans to spend 2tn Thai baht ($65bn; £40bn) on infrastructure projects after last year's devastating floods in the country. | |
Analysts said that given the strong domestic demand and increased government spending, a rise in consumer prices continued to remain a concern. | |
They said the central bank could be forced to start raising interest rates in the coming months. | |
"The Bank of Thailand may have to reverse this move, certainly in the first half of next year," said Credit Suisse's Mr Wandesforde. |
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