BANGKOK : Thailand’s policy interest rate is at an adequate level to address economic risks as the recovery is uneven, while the current inflation target range of 1 per cent to 3 per cent remains appropriate, the central bank said.
After resisting repeated calls by the government for easing, the Bank of Thailand’s monetary policy committee on Oct. 16 unexpectedly voted 5-2 to cut the one-day repurchase rate by 25 basis points to 2.25 per cent, the first decrease since 2020. Two members voted to keep the rate steady.
“The current policy rate remained adequate to address risks to the outlook for the economy, inflation, and financial stability,” according to the minutes of the meeting released by the BOT on Wednesday.
The policy rate should remain neutral and consistent with economic potential, and it should not be so low that financial imbalances would build up in the long term, senior central bank director Surach Tanboon told a monetary policy forum.
The next rate review is on Dec. 18.
BOT Deputy Governor Piti Disyatat told Reuters last week the current policy stance was well balanced and the rate cut was a recalibration, not the start of an easing cycle.
Piti on Wednesday told Reuters that talks this week between the central bank and the finance ministry over the inflation target were “constructive”.
The government and BOT agreed at the meeting to maintain the current inflation target for 2025, in return for assurances the BOT would support fiscal policy and help kick-start growth, Finance Minister Pichai Chunhavajira said afterwards.
NO INFLATION CONCERN
The government wanted actual inflation at 2 per cent, the midpoint of the range, the finance minister added, as it was currently too low – just 0.20 per cent in the first nine months of 2024.
At Wednesday’s monetary policy forum, Piti said inflation was low and stable and was not an obstacle for the economy, which was expected to expand close to its potential next year.
“We want to see inflation that is not a problem … the range of 1 per cent to 3 per cent does not hinder economic activities,” he said.
All felt the current range was appropriate, Piti said.
“All parties agreed that inflation in the framework is a good thing, and if it rises because the economy expands, it is not an issue,” he added.
The BOT expects headline inflation, which was at 0.61 per cent in September, to return to within the target range late this year.
It predicts average inflation at 0.5 per cent this year and 1.2 per cent next year.
At the Oct. 16 meeting, the BOT raised its 2024 GDP growth forecast to 2.7 per cent from 2.6 per cent but trimmed its 2025 outlook to 2.9 per cent from 3.0 per cent. GDP growth was 1.9 per cent last year.
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