Political pressure will not force Thailand’s central bank to make interest rate decisions independently, the country’s central bank chief told CNBC on Monday.
“The proof is in the pudding,” Bank of Thailand Governor Sethaput Suthiwartnarueput told CNBC.Asian street signs.”
Despite “calls” to cut interest rates, the BOT would not have done it “if we had not operated independently,” he added.
“I think the governance framework for that is quite clear… the decisions that have been taken show that they were taken on a [what] We felt this was best suited for the economy, rather than considering trying to alleviate political or other pressures.”
BOT kept the base interest rate stable at 2.50% in the latest policy meeting in April. But the central bank has faced strong pressure from the government to reduce interest rates, Iincluding Prime Minister Srettha Thavisin, Reuters reported.
Lower borrowing costs tend to stimulate economic growth because it encourages businesses to invest and consumers to spend.
inside April meeting minutesmonetary policy committee “expressed concern about rising household debt and recognized the importance of debt reduction.”
“High levels of outstanding debt can hinder long-term economic growth, especially if debt does not contribute to future income or asset accumulation,” the report said.
Balancing act
Sethaput acknowledged that it is a “difficult balancing act” for the central bank as it tries to manage an economic recovery and weak monetary policy.
“If you look at the reasons why growth is slowing, it doesn’t have much to do with things that are sensitive to interest rates,” he said.
The BOT chief said the current ratio is “supportive to the recovery process” and consistent with trying to achieve “orderly deleveraging – striking a balancing act between not increasing the debt burden for households too much, but at the same time, discourage people from taking on too much new debt.”
The Thai economy is forecast to grow 2.6% in 2024 and 3.0% in 2025, according to the latest BOT minutes., with continued support from personal consumption and tourism.
While inflationary pressures have eased in recent months, Sethaput noted, “we see inflation returning, gradually rising and returning to our target range – between 1% and 3% ” later this year.
Structural headwinds make the outlook for the economy uncertain, the governor added, along with the need to boost productivity as the country faces demographic challenges with “force Labor is shrinking.
He said there was a need to “focus more on public investment, rather than short-term stimulus measures”.
“I think it’s very important to put more emphasis on deregulation,” including “ease of considering the type of business,” Sethaput noted.
