Thai Central Bank Chief: No Need for Rate Cut at This Time Amid Government Push for Easing, Reports Reuters

By Orathai Sriring and Kitiphong Thaichareon

BANGKOK – Thailand’s central bank, led by Governor Sethaput Suthiwartnarueput, has stated that there is no immediate need to lower interest rates, even after the Federal Reserve’s recent policy easing. He emphasized that the economic outlook for Thailand remains stable, highlighting the central bank’s independence in making monetary decisions despite government pressure for a rate cut.

The Bank of Thailand (BOT) has maintained the key interest rate at 2.50%, marking a decade-high, and has resisted calls for adjustments during an ongoing conflict with the government. This standoff occurs as the country faces a sluggish economy, which grew by just 1.9% in 2023, with a projected expansion of only 2.6% for the current year.

Sethaput stated, “The policy is still outlook-dependent. The current outlook is the same as forecast. Nothing has changed,” indicating that an unscheduled meeting before the next scheduled review on October 16 is unnecessary. He cautioned against overreacting to the latest data, arguing that excessive focus on immediate information could lead to market volatility, which the central bank seeks to avoid.

Addressing the issue of household debt, which is around 91% of the country’s gross domestic product—among the highest in Asia—Sethaput argued that simply lowering rates would not resolve debt challenges. Instead, he suggested a comprehensive approach, including debt restructuring for vulnerable populations.

In a presentation at a BOT symposium, Sethaput stressed the importance of central bank independence, stating, “Central banks are designed to support the implementation of monetary policies that must prioritize long-term stability.” He warned that while lower rates might provide short-term growth, they could lead to inflation and other vulnerabilities that would ultimately constrain long-term economic growth and risk crises.

The current government, led by Prime Minister Paetongtarn Shinawatra, has advocated for a rate cut to enhance their fiscal stimulus efforts, including a notable plan to distribute cash handouts to millions of Thais to boost economic activity.

Sethaput’s remarks come shortly after Paetongtarn’s administration took office, with the Prime Minister previously suggesting that central bank independence posed obstacles to solving economic challenges. The ruling party is also expected to appoint Kittiratt Na Ranong, a former finance minister known for his clashes with the central bank, as the next BOT board chairman.

Although the BOT board chair does not directly influence monetary policy, they do play a role in appointing governors and members of the monetary policy committee. Additionally, Sethaput mentioned that the BOT is closely monitoring the baht, which has strengthened and become more volatile due to fluctuations in the dollar, noting that this volatility has not significantly affected exports.