Thailand's central bank cut its key interest rate by a quarter-point to a record low on Wednesday, as the economy is set to contract more than expected due to weaker domestic demand and tourism amid the coronavirus pandemic.

The Monetary Policy Committee of Bank of Thailand voted 4-3 to cut the policy rate to 0.50 percent from 0.75 percent, with immediate effect. Three members voted to hold the rate at 0.75 percent.

This was the third reduction in rates this year.

GDP is expected to fall more than expected as pandemic has weighed on tourism and exports. Due to rising unemployment, consumption and private investment decreased further.

The economy had contracted 1.8 percent in the first quarter, which was the fastest decline in more than eight years.

The committee observed that timely fiscal measures are required to support employment and small and medium sized enterprises.

Due to lower energy prices, the annual average of headline inflation would be more negative in 2020 than the previous assessment, the bank noted.

The bank said it will monitor developments in economic growth, inflation and financial stability and the impact of the coronavirus and vowed to use additional appropriate monetary policy tools if necessary.

With the policy rate now not much above zero, the central bank will soon need to turn its attention to non-conventional policy options, Gareth Leather, an economist at Capital Economics, said.

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