BANGKOK, Sept 20 (Askume) – Thailand’s central bank governor stressed his independence amid government pressure to cut rates, saying on Friday that Thailand does not need to immediately cut interest rates after the Federal Reserve eased policy as the economic outlook remains unchanged.
Bank of Thailand (BOT) Governor Sethaput Suthiwartanaruput also said lower borrowing costs would not help solve the country’s debt problems, rejecting the government’s claim that current policy rates were hampering efforts to revive the economy.
Thailand’s key interest rate has remained at 2.50% for a year, the highest in a decade, while the Bank of Thailand is in talks with the governmentThe prolonged impasse has dampened calls for policy easing as Thailand struggles to propel an economy that grew just 1.9% in 2019. Growth is expected to be 2.6% .
“Policy still depends on the outlook. The current outlook is the same as the forecast. There is no change,” Sethaput told reporters, adding there was no need for an off-cycle meeting ahead of the next rate review on October 16.
“If we focus too much on the latest news, there will be a lot of volatility. We don’t want monetary policy expectations to add to the volatility in the market,” he said.
Sethaput said the rate cut would not help solve Thailand’s household debt problem, which at close to 91% of gross domestic product, is one of the highest in Asia.
Sethaput said the problem must be addressed through a combination of policies, including loan restructuring for disadvantaged groups.
Short-term boost, long-term problem
Speaking at a BOT seminar on Friday, Sethaput stressed the importance of the central bank remaining independent.
“The objective of the central bank is to support the implementation of monetary policy and monetary policy should focus on long-term stability,” he said.
“If central banks are not independent enough, they may lose the principle of long-term perspective.”
He said although low interest rates could boost short-term growth, inflation would be compromised, which could create vulnerabilities such as debt accumulation and speculation, limit long-term growth and create crisis risks.
The government of Prime Minister Patongtarn Shinawatra and predecessor Sretha Thawisin has urged rate cuts to step up fiscal stimulus, including the upcoming launch of a major programme to distribute 10,000 baht ($302) relief payments to 45 million Thai people, to stimulate economic activity.
The central bank governor’s comments come just weeks after Patongtarn, who took office , said earlier this year that the central bank’s independence was an obstacle to solving economic problems .
Askume reported this week that his ruling Pheu Thai party has nominated his loyalist and former finance minister Kittirat Na Ranong, who has a record of confrontation with the central bank, as the next BOT board chairman .
The Chairman of the BOT Board has no involvement in monetary policy, but participates in the appointment of the Governor and the Monetary Policy Committee.
Sethaput also said the Bank of Thailand is monitoring the baht, which has become stronger and more volatile due to the weak dollar, adding that the baht’s strength has not had much impact on exports.
“We don’t want there to be too much ups and downs in the matter,” he said.
(1 USD = 33.0700 Baht)
