Thailand cuts interest rate

Thailand's interest rates are headed lower. From Bloomberg today:

Thailand's central bank cut its key interest rate for a third time this year and signaled borrowing costs may be lowered further to spur a slowing economy as confidence slides and anti-government protests mount.

The Bank of Thailand lowered its one-day bond repurchase rate to 4 percent from 4.5 percent. The decision was expected by 10 of 16 economists surveyed by Bloomberg News.

"Monetary policy could be eased further at an accelerated pace to support economic growth," Suchada Kirakul, a Bank of Thailand assistant governor, told reporters at press briefing. "Weak private sector confidence will dampen domestic spending. The interest rate is still on an easing trend."

Not everyone is convinced the rate cut will help.

"It's hard to see how an interest rate cut can have much of an impact on consumer spending and investment," said George Worthington, an economist at Thomson IFR in Sydney, who predicted the 50 basis point reduction. "Political uncertainty is having a major impact on confidence, so until that is sorted out the central bank's moves may only have a limited effect."

Well, if it doesn't work, they can always change policy. We know the Thai authorities are flexible.

Elsewhere in Asia, the Monetary Authority of Singapore yesterday said it was keeping its exchange rate policy unchanged. From CNA:

"While domestic cost pressures have emerged in some segments of the economy, they remain relatively contained and overall inflationary pressures are expected to stay low," the MAS said in its bi-annual policy statement on Tuesday.

"The MAS will maintain the policy of a modest and gradual appreciation of the Singapore dollar...in the period ahead. There will be no re-centring of the policy band, or any change to its slope or width."

This came as the Singapore government reported 6 percent first quarter GDP growth compared to the same period last year, or 7.2 percent on an annualised quarter-on-quarter basis.

Meanwhile, Japan looks likely to continue to tighten only very gradually after reporting that machinery orders fell in February. Bloomberg reports:

Japan's machinery orders fell a more-than-expected 5.2 percent in February, highlighting concern among manufacturers that export growth may slow this year...

Orders for electronic machinery such as semiconductor testing equipment led the declines, falling 29.7 percent, the biggest drop in almost nine years.

In other news from Japan, its current account surplus rose 4.9 percent in February as exports rose 9 percent and imports climbed 10.3 percent while money supply measured by M2 plus certificates of deposit rose 1.1 percent year-on-year.