The Bank of Thailand maintained its benchmark interest rate at 2.5% despite pressure from Prime Minister Srettha Thavisin for monetary easing.
- The Bank of Thailand held its benchmark rate steady at 2.5% despite calls for monetary easing, citing limited impact of monetary policy on structural economic problems.
- Thailand’s inflation has fallen short of the bank’s target range of 1% to 3% for two straight quarters, largely due to government subsidies on diesel and electricity.
- The government’s flagship digital wallet policy, initially planned to be funded by borrowing, has been adjusted and delayed, causing a public feud with the Bank of Thailand governor.
- The central bank expects headline inflation to be 0.6% this year, lower than the previous forecast of 1% in February.
The Committee voted 5 to 2 to maintain the policy rate at 2.50 percent. Two MPC members voted to cut the policy rate by 0.25 percentage point.
The Thai economy is projected to grow in 2024 at a higher rate than the previous year with continued support from private consumption and tourism, along with public expenditure which is anticipated to accelerate for the remainder of the year.
Monetary Policy Committee’s Decision 2/2024 (bot.or.th)
Inflation has fallen below the target range of 1% to 3%, and the economy faces structural challenges. The government’s subsidies on diesel and electricity have kept inflation low, but they are set to expire soon. Srettha’s proposal for a digital wallet funded by government budgets has faced delays, and the central bank governor has opposed it.
The central bank expects lower inflation and has lowered its growth outlook. Despite government calls for rate cuts, the central bank has emphasized that monetary policy cannot solve the underlying economic issues. Analysts predict that the central bank may start gradually easing rates due to soft GDP growth and declining inflation. Thailand’s Bond Market Association and SCB EIC expects the central bank to cut rates twice this year, starting in June.
Despite government pleas for rate cuts to boost growth, the central bank has maintained its independence and rejected the need for monetary tools to address the economic issues. The government’s plan for cash handouts has also been adjusted. Despite calls for rate cuts, the central bank is monitoring the impact of geopolitical tensions and government subsidies on energy prices before making any changes.
