Thai Central Bank Holds Key Rate as Government Presses for Cut
Bank of Thailand Resists Government Pressure for Interest Rate Cut
Thailand’s central bank decided to keep its key interest rate unchanged for the second consecutive meeting, defying government pressure to lower borrowing costs and stimulate the country’s struggling economy. The Bank of Thailand’s monetary policy committee, in a 5-2 vote, opted to maintain the one-day repurchase rate at 2.50%, the highest level in over a decade. This decision followed a series of rate hikes since August 2022 to combat inflation, with two committee members advocating for a 0.25 basis point cut.
Economists Predict Stability in Interest Rates
All 27 economists surveyed by Reuters accurately anticipated the central bank’s decision to retain the existing interest rate, while also acknowledging that a rate cut was more likely to occur earlier than initially expected.
Bank Assures Readiness to Adjust Rates
The Bank of Thailand assured the public of its preparedness to make appropriate adjustments to interest rates in response to prevailing economic conditions. It highlighted the sluggish growth of the economy, emphasizing the need for support from domestic demand despite underlying structural challenges that continue to impede growth.
Disappointment for the Government
The central bank’s decision was met with disappointment from the government, particularly Prime Minister Srettha Thavisin, who reiterated the urgency of an interest rate cut to revitalize Southeast Asia’s second-largest economy. The prime minister, also serving as the finance minister, has been at odds with the central bank over the direction of monetary policy, advocating for support in the face of negative inflation.
Revised Growth Outlook and Inflation Projections
Bank of Thailand revised its 2024 growth outlook to 2.5-3%, down from the previous estimate of 3.2%, citing slower-than-expected growth. Additionally, the central bank anticipated headline inflation to hover around 1% in the current year, with an expected uptick in inflation in 2025.
Consumer Prices and Economic Outlook
Consumer prices in Thailand experienced a downward trend for four consecutive months year-on-year, largely driven by government energy subsidies, falling below the central bank’s target range of 1% to 3%. The bank underscored the economy’s slower growth trajectory and acknowledged the need for measures to address deteriorating competitiveness and other structural impediments that hamper overall growth.
By Orathai Sriring and Kitiphong Thaichareon
