April 10 (Bloomberg) -- Thailand's central bank will probably cut its benchmark interest rate for a third time this year to spur the slowing economy and curb gains in the baht as confidence slides and anti-government protests mount.
The Bank of Thailand will lower its one-day bond repurchase rate to 4 percent from 4.50 percent, according to 10 of 16 economists surveyed by Bloomberg News. The other six economists in the poll expect a quarter of a percent cut. The decision is due at 2 p.m. tomorrow in Bangkok.
``The Bank of Thailand is likely to cut the rate to kick- start the economy and tie down the ever-appreciating baht,'' Frederic Neumann, an economist at HSBC Holdings Plc. in Hong Kong wrote in an e-mailed note. ``Policy makers have become worried about the growth outlook given recent political and policy upsets.''
Protests are planned in Bangkok this week by as many as 12 groups opposed to the September coup and critical of the military-installed government's performance plan. The nation's finance minister has called for lower rates to spur spending after investment curbs and terrorist attacks eroded confidence.
The central bank has cut its key rate by 25 basis points at two previous meetings this year. A 50-basis-point cut at tomorrow's meeting would be the biggest reduction since June 2003. A basis point is equivalent to 0.01 percentage point.
Baht Gains
The baht is trading near its highest level against the dollar in nine years after Bank of Thailand measures to curb the currency's 16 percent surge last year by penalizing foreign investors backfired. Limits on bringing money into the country eroded consumer and business confidence, crimping imports, and caused rifts within the government.
``This baht scenario is obviously not good,'' said Catherine Tan, head of emerging markets at Forecast Singapore Pte. ``Exporters are still receiving money and they have to sell the dollars they receive,'' which is pushing the baht higher.
Inflation slowed to 2 percent in March, the lowest in three years, from 2.3 percent a month earlier as consumption cooled amid a slump in confidence.
A measure of business sentiment tumbled to the lowest in more than five years in February. An index of consumer confidence fell for a fourth month in February, dropping to a six-month low. The gauge has slid for 15 of the past 17 months.
The International Monetary Fund on March 23 cut Thailand's 2007 economic growth outlook for a second time in six months, lowering it to 4.5 percent from 5 percent. The economy expanded 5 percent last year, with fourth-quarter growth of 4.2 percent the slowest pace in almost two years.
Cut Rates
Finance Minister Chalongphob Sussangkarn, a critic of the central bank's currency controls before joining the government, said last month the benchmark rate must be cut to encourage consumer spending and spur the slowing economy. Chalongphob replaced Pridiyathorn Devakula, a supporter of the investment restrictions who quit citing disputes with other Cabinet members.
``Given that the central bank's capital controls have thus far failed to curb the baht's strength, the Finance Ministry is believed to be advocating for more aggressive interest rate cuts,'' Usara Wilaipich, a Bangkok-based economist at Standard Chartered Bank, wrote in a note to clients.
The baht has climbed 2.3 percent this year to 34.92 per dollar onshore. An offshore rate, spawned by the investment restrictions, has surged four times faster.
Groups, including some backed by the Thai Rak Thai political party founded by deposed Prime Minister Thaksin Shinawatra, last month began holding anti-government and coup rallies in Bangkok.
The following is a table of economists' estimates of where the central bank's one-day bond repurchase rate will be after the April 11 policy meeting. Figures are in percentages:
Thailand Benchmark Interest Rate Estimates
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April 11 May 23 End of
Firm 2007
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Median 4.00% 4.00% 3.75%
% Estimates at Median 62.50% 71.43% 33.33%
Average 4.09% 3.93% 3.64%
High 4.25% 4.00% 4.00%
Low 4.00% 3.75% 3.00%
Number of Estimates 16 8 10
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Action Economics 4.25% -- --
Capital Nomura Securities 4.00% -- 3.50%
CIMB Securities 4.25% 4.00% 4.00%
Citigroup 4.25% 4.00% 4.00%
Credit Suisse 4.00% -- 3.50%
DBS Group 4.25% -- --
Forecast Singapore 4.00% 4.00% 3.75%
HSBC 4.00% 4.00% 3.50%
ING Groep NV 4.00% -- --
Kasikorn Research 4.00% -- --
Lehman Brothers 4.25% -- --
Phatra Securities 4.00% -- --
Standard Chartered Bank 4.00% 3.75% 3.75%
Thomson IFR 4.00% -- --
UOB Kay Hian 4.25% 4.00% 3.75%
Westpac Banking Corp 4.00% 3.75% 3.00%
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To contact the reporter on this story: Suttinee Yuvejwattana in Bangkok at Suttinee1@bloomberg.net
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