Bank of Thailand Faces Pressure to Cut Rates

[webfact]

Picture courtesy: Thai Rath

 

In an effort to invigorate inflation and support the Thai economy, Finance Minister Pichai Chunhavachira has renewed his call for the Bank of Thailand to lower its policy interest rate. The appeal comes ahead of the Monetary Policy Committee's (MPC) meeting on Wednesday, where decisions about rate adjustments are expected to be made.

 

Despite the plea from the Finance Ministry, the authority to change the rate rests solely with the MPC. Minister Pichai has been in close dialogue with the bank, consistently supplying economic data to strengthen the case for a rate cut. As it stands, Thai interest rates are at 2.25%, a level deemed 'neutral' by many economists.

 

Inflation management is a key concern, with the Finance Ministry set to put forward a 2025 target framework to the cabinet this month. The aim is to guide the central bank in maintaining inflation within a target range, somewhat higher than the current rate which hovers below expectations.

 

In a related move, the minister is also progressing initiatives like the 10,000 baht (£215) cash handout programme for seniors, aiming for a rollout next month during Chinese New Year. This measure is one of several designed to stimulate the economy.

 

Local research firms, including the Kasikorn Research Center (K-Research), largely predict that the MPC will maintain the existing rate. Their rationale is to preserve monetary policy space amidst rising uncertainties expected next year. This strategic patience may last until February 2025, when another rate cut could occur if economic conditions warrant it.

The backdrop of these discussions includes potential international economic threats, such as the possibility of the US imposing higher import tariffs on countries including Thailand.

 

There is also concern about increased competition from Chinese products, possibly impacting Thai manufacturers adversely. Such challenges could place additional strain on an economy that is currently buoyed by tourism and government spending.

 

K-Research and others expect inflation in 2025 to linger below the bank's target of 1-3%. Thus, carefully calibrated rate cuts might become necessary to shield the economy from these external and internal pressures.

 

Meanwhile, banks like Krungsri and Siam Commercial Bank's research arms echo the sentiment that maintaining the rate for now is prudent. They note that the MPC needs to gauge the impact of previous rate changes and government policy measures comprehensively.

 

Ultimately, the MPC's future decisions will hinge on data, inflation trends, and overall economic stability, elements that remain enveloped in uncertainty amidst shifting global economic dynamics. As the situation evolves, both the timing and magnitude of potential interest rate adjustments will be critical in charting Thailand's economic course, reported Bangkok Post.

 

-- 2024-12-17

 

 

[nobodysfriend]

BOT is independent of the government .

That is fundamental and should stay like this , despite all the pressure by the Thaksin controlled government .

Thaksins motivation for a further rate cut is to benefit from this somehow .

He is not the Philanthropist he likes to be seen as .