Thai PM, BOT Chief Discuss Rates as Deflation Fuels Easing Call
(Bloomberg) -- Thailand’s Prime Minister Srettha Thavisin discussed monetary policy with the central bank governor on Wednesday, days after publicly urging the the Bank of Thailand to start cutting borrowing costs following months of negative inflation.
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The discussion with BOT’s Sethaput Suthiwartnarueput covered interest rates and the economic situation, Srettha, who is also the finance minister, told reporters in Bangkok on Wednesday. He acknowledged that the meeting was in no way an exercise to reduce the central bank’s autonomy.
“I have no power to interfere” on the rate decision, Srettha said. “BOT is an independent organization. I haven’t ordered. I just explained the situation.”
This is the second much-publicized meeting Srettha has had with Sethaput since taking office last year. While there was no immediate response from Sethaput, BOT has scheduled a briefing on Monday to explain its policies.
Srettha, who just days ago called for lower rates to help boost activity, said he explained to Sethaput the current economic situation. Southeast Asia’s second-largest economy has been staging the region’s slowest recovery post-pandemic, while consumer prices have fallen for three straight months through December in signs of waning demand.
The Thai baht was little changed on a day when most major Asian currencies were down versus the dollar.
While Srettha believes that cheaper borrowing costs are needed to boost credit demand, and in turn economic activity, the BOT has in the past maintained that the deflationary trend is a result of state subsidies and is not an accurate reflection of falling consumption.
The central bank, which has paused its tightening campaign after delivering 200 basis points of increases to lift rates to a decade-high, hasn’t signaled readiness to start easing anytime soon.
“We maintain our forecast that the BoT will keep the policy rate on hold for the foreseeable future,” according to Standard Chartered Bank Plc economist Tim Leelahaphan. “However, we believe risks are increasingly skewed towards a cut in 2024.”
The prime minister said he will brief the central bank head about the government’s proposed economic stimulus program at a separate meeting.
Besides the call for rate cut, Srettha’s government has proposed an about $14 billion cash handout program to stimulate the economy. Governor Sethaput had earlier flagged concerns about the so-called digital wallet program, under which Srettha plans to hand out 10,000 baht ($285) each to about 50 million Thais to boost consumption.
The economy is forecast to expand 3.2% this year, up from an estimated 2.5% in 2023, according to the World Bank. Srettha wants to lift that pace to 5% during his term.
--With assistance from Pathom Sangwongwanich.
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