Thailand's Central Bank Open to Adjusting Monetary Policy
Thailand's central bank, facing pressure from the government to cut interest rates, has indicated a willingness to adjust its monetary policy if the economic outlook changes significantly. Deputy Governor Alisara Mahasandana stated that the bank's monetary policy committee (MPC) is open to all input, but needs to balance immediate and long-term economic factors when setting rates.
Prime Minister Srettha Thavisin, who also holds the finance portfolio, has publicly challenged the central bank's stance, advocating for rate cuts to stimulate the economy amidst high household debt and China's slowdown. However, the MPC emphasizes the need to weigh both short-term and long-term impacts on monetary policy objectives.
According to Alisara, a recalibration of monetary policy could occur if the growth and inflation outlook changes, or if structural impediments significantly lower long-term potential growth. The central bank currently forecasts Thailand's economy to grow 2.6% this year and 3.0% in 2025, following last year's 1.9% growth.
While higher private consumption and tourism are expected to bolster growth, uncertainties remain, including the pace of export recovery. Alisara also noted that annual headline inflation is expected to return to the central bank's target range of 1%-3% by year-end.
Despite negative headline inflation, Alisara emphasized that it does not reflect weak demand or deflation. The Thai baht is expected to remain volatile, driven by external factors, especially dollar strength. However, domestic factors such as improved economic activity and Thailand's current account surplus should provide more support than last year.