# Bank of Thailand holds key interest rate unchanged at 2.50%

- Link: https://www.thailand-business-news.com/banking/145850-bank-of-thailand-holds-key-interest-rate-unchanged-at-2-50
- Published: 2024-06-12T16:59:46+07:00
- Author: Zaw Win Maung

The Bank of Thailand has decided to keep its key interest rate unchanged at 2.50%,
despite government calls for a rate cut to stimulate the sluggish economy. The central
bank expects the economy to grow by 2.6% in 2024 and 3% in 2025, driven by domestic
demand and tourism.

## Key Takeaways

 * The Monetary Policy Committee voted 6 to 1 to maintain the policy rate at 2.50
   percent, reflecting confidence in the economy’s convergence to its potential 
   and macro-financial stability.
 * The Thai economy is projected to expand by 2.6 and 3.0 percent in 2024 and 2025,
   mainly driven by domestic demand, tourism, and government disbursement, while
   exports face challenges from higher competition and structural headwinds.
 * Concerns over high household debt led the Committee to support measures for debt
   deleveraging, aligning lending with borrowers’ repayment capacity, and addressing
   credit access issues, particularly for SMEs, to foster long-term financial stability.

However, concerns over high household debt and the need for structural reforms have
led to the decision to maintain the interest rate. The central bank also anticipates
a gradual increase in inflation towards its target range of 1-3%. The next meeting
of the Monetary Policy Committee is scheduled for August 21.

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The majority of the committee believes that the current policy rate is appropriate
for the economy, while one member voted for a rate cut to address structural challenges
and alleviate debt-servicing burden.

## Economic growth forecasted at 2.6 and 3.0% for 2024 and 2025

The central bank forecasts 2.6% economic growth in 2021 and 3% in 2025. This will
be supported by strong domestic demand in the first quarter, ongoing recovery in
tourism, and increased government spending in the second quarter.

The baht has depreciated against the US dollar, and overall financial conditions
remain stable. The committee supports targeted measures to address credit access
issues, especially for SMEs. The monetary policy framework aims to maintain price
stability, support sustainable growth, and preserve financial stability. The committee
will continue to monitor economic developments in deliberating future monetary policy.

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## Household debt concerns

The Committee is concerned about high household debt levels and believes that credit
growth should be in line with ongoing debt reduction to promote long-term financial
stability. The Committee also backs the Bank of Thailand’s policy of implementing
measures through financial institutions to align lending with borrowers’ ability
to repay debt, and supports debt restructuring to help those with repayment difficulties.

Additionally, the Committee acknowledges the importance of addressing credit access
issues, particularly for SMEs, and therefore supports targeted measures such as 
credit guarantee schemes to increase credit access for SMEs, which is essential 
for economic growth.

The current monetary policy aims to maintain price stability, support sustainable
growth, and preserve financial stability. Most Committee members believe that the
policy rate is in line with improving growth and inflation outlook, while also promoting
macro-financial stability in the long term. However, it is important to closely 
monitor economic developments, particularly the recovery of exports and government
measures. The Committee will consider growth and inflation outlook when discussing
future monetary policy.