Thai Central Bank Holds Interest Rates Steady Amid Economic Caution

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FILE photo courtesy: Bank of Thailand

 

In a widely anticipated move, the Bank of Thailand announced on Wednesday that it would maintain its key interest rate at 2.25%. This decision comes after a surprise dip last October, marking the conclusion of the bank's final meeting for the year.

 

The Bank's Monetary Policy Committee reached an unanimous decision, aligning with expectations from the majority of economists polled by Reuters. Out of 30 economists surveyed, just two had foreseen a further reduction, predicting a 25 basis-point cut. The consensus, however, suggests a potential decrease by mid-2025.

 

This pause in interest rate adjustments arrives amidst ongoing economic challenges and calls from the Pheu Thai government for more aggressive measures to invigorate the economy. Finance Minister Pichai Chunhavachira argues that with inflation lingering below 1%, the economy isn't demonstrating robust growth signals.

 

Thailand, Southeast Asia's second-largest economy, has been trailing behind its regional counterparts. Factors such as high household debt and subpar export performance have impeded growth, as evidenced by last year's modest 1.9% GDP growth rate.

The central bank contends that current low inflation figures are skewed by populist policies, specifically fuel subsidies, which obscure the true economic picture. The Bank revised its 2024 headline inflation forecast to 0.4%, down from an earlier 0.5%, which remains beneath the target range of 1% to 3%. Slightly higher inflation is projected for 2025 at 1.1%, albeit still below previous forecasts.

 

Central Bank Governor Sethaput Suthiwartnarueput clarified that the October rate cut was not indicative of a broader trend, suggesting a cautious approach moving forward. This sentiment was echoed by Supavud Saichuea, Chairman of the National Economic and Social Development Council. He highlighted that while fiscal policy would take a step back due to deficit concerns, monetary policy will increasingly become a pivotal force in promoting economic growth.

 

Looking ahead, Saichuea forecasts that the Pay Committee are likely to commence key rate reductions in the latter half of 2025, potentially lowering the benchmark rate from 2.25% to 1.5% by year's end. This anticipated strategy underscores the central bank's role in maintaining economic momentum in lieu of fading government stimulus measures.

 

As Thailand navigates these economic uncertainties, the central bank's cautious stance aims to balance stabilization with growth aspirations, keenly observing regional economic shifts while planned fiscal cutbacks may necessitate strategic monetary interventions, reported Bangkok Post.

 

-- 2024-12-18