Thai PM urges the Bank of Thailand to cut interest rates

Thailand’s Prime Minister, Srettha Thavisin, has urged the central bank to consider cutting borrowing costs in order to support the economy.

• Thailand’s Prime Minister is urging the central bank to consider cutting borrowing costs to support the economy, signaling a disagreement between fiscal and monetary policymakers.
• The recent decline in consumer prices and prolonged deflation provide room for the central bank to pivot to easing monetary policy.
• The central bank’s tightening measures, including interest rate increases, have negatively impacted the economy, particularly small and medium enterprises and low-income groups, according to the Prime Minister.

The Bank of Thailand left its policy rate unchanged at 2.5% in November and will review policy again on February 7 as Srettha’s government is focused on stimulating growth and consumer spending in the country’s economy.

Thailand’s economy has been slow to recover from the pandemic, and the prime minister aims to lift the growth pace to 5%.

This call for rate cuts comes as consumer prices continue to show negative readings, indicating room for easing.

Thailand’s consumer price index (CPI) dropped 0.83% in December, marking the eighth consecutive month that it has fallen outside the Bank of Thailand’s target range. This decline is the lowest in 34 months and the third straight month of decline.

However, the Bank of Thailand has suggested that it may not be ready to consider easing, citing the recent decline in consumer prices as a result of state subsidies.

The prime minister believes that further rate increases are unnecessary and that cutting interest rates could be considered due to low inflation. The Thai baht dropped in response to the prime minister’s comments.

Thailand’s potential economic growth is expected to be the lowest in the ASEAN region over the next 20 years, according to the World Bank.

Disagreements between the prime minister and the central bank have emerged in the past, particularly regarding the government’s plan for a cash handout program.