The Deputy Finance Minister Paopoom Rojanasakul stated on Tuesday that the Bank of Thailand is not sufficiently managing the fluctuations of the baht, attributing the issue to interest rates that do not align with the current state of the economy.
This week, the baht reached a 31-month high, trading at 32.40 to the US dollar, while Mr. Paopoom indicated that a more appropriate level would be around 34 baht. The government has consistently called for a reduction in interest rates, arguing that such action is essential for economic revival.
The Bank of Thailand acknowledged its recent market interventions aimed at stabilizing the value of the baht but did not provide specific details about these actions.
Finance Minister Pichai Chunhavajira mentioned on Tuesday that he has discussed the baht’s strength and the central bank’s inflation target with Governor Sethaput Suthiwartnarueput. He added that an agreement regarding the inflation target is expected to be finalized this month.
These remarks came ahead of an upcoming meeting between the ministry and the central bank to deliberate on both the inflation target and currency matters.
Since the start of the year, the baht has appreciated by 5.2%, making it the second-best performing currency in the region after the Malaysian ringgit. However, this rapid appreciation has had a negative impact on key sectors such as exports and tourism, which are vital for Thailand’s economy.
Mr. Pichai noted that the baht, inflation targets, and interest rates are interconnected. “We have been in ongoing discussions … These matters require comprehensive data and analysis,” he told reporters. “This isn’t a one-time conversation,” he added, emphasizing that the central bank is involved in managing the baht’s value.
A review of the 1-3% inflation target range, established in 2020, may increase the likelihood of a rate cut. Despite pressure to ease monetary policy, the central bank has maintained the benchmark interest rate at 2.50% for the fifth consecutive meeting in August. Mr. Sethaput has remarked that just because the US Federal Reserve has begun to cut rates, it does not imply that other countries should follow suit. The next rate review is scheduled for October 16.
Although the Thai economy saw a growth rate of 2.3% in the second quarter, analysts have expressed concerns regarding fiscal policy uncertainty, which may affect future prospects. The central bank projects economic growth of 2.6% for the year, up from a 1.9% increase last year.
