Thailand’s central bank keeps interest rate at 2.50 percent

The Bank of Thailand’s Monetary Policy Committee has decided to keep the policy rate steady at 2.50 percent, citing the nation’s positive economic recovery.

• The Bank of Thailand has decided to maintain the policy rate at 2.50 per cent, indicating confidence in the nation’s economic recovery driven by surging tourism and domestic demand.
• The Monetary Policy Committee expects the inflation rate to return to the targeted frame late this year, and sees the current policy rate as conducive to improving economic growth potential.
• Thailand’s gross domestic product (GDP) expanded by 2.3 per cent in the second quarter of 2024, attributed to increases in private consumption, government spending, and exports.

The committee expects economic expansion driven by increased tourism and domestic demand, but notes that export recovery remains slow. It also anticipates inflation to return to target levels later in the year.

The Monetary Policy Committee (MPC) of the Bank of Thailand voted to maintain the policy rate at 2.50 percent in its April 10, 2024 meeting. While two members favored a 0.25 percentage point cut, the majority believed the current rate supports macroeconomic stability and that monetary policy has limited impact on structural issues hindering the Thai economy.

The Thai economy is projected to grow at a faster rate in 2024 than the previous year, driven by private consumption, tourism, and accelerated public expenditure. However, export recovery remains sluggish. Inflation is expected to gradually rise towards the target range by year-end, supported by supply factors and government subsidies.

The MPC remains concerned about elevated household debt and the need for debt deleveraging to mitigate long-term vulnerabilities. The MPC acknowledged the effectiveness of monetary policy in resolving financial access issues is limited, welcoming the Bank of Thailand’s efforts to accelerate targeted measures, particularly responsible lending initiatives.

The Thai economy faces several uncertainties, including the pace of export recovery, government budget disbursement, and fiscal stimulus measures. The Committee will continue to monitor these developments and adjust monetary policy accordingly.

While inflation is projected to gradually increase towards the target range by the end of 2024, concerns persist regarding elevated household debt, financial access issues, and uncertainties in the foreign exchange market. The baht’s volatility relative to the US dollar and other regional currencies is being closely monitored. The Committee will continue to consider growth and inflation outlooks in its future monetary policy decisions.

The committee is closely monitoring the impact of declining credit quality on borrowing costs and overall credit growth, while also recognizing the challenges faced by small and medium enterprises in accessing credit. Additionally, the National Economic and Social Development Council reported a 2.3 percent GDP growth in the second quarter of 2024, with private consumption, government spending, and exports contributing to the positive growth.