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BOT faces pressure to slash rates

BOT faces pressure to slash rates

Finance Minister, Pichai Chunhavachira, has reiterated his call for a reduction in the policy interest rate to stimulate inflation, following a recent meeting of the Monetary Policy Committee (MPC). He emphasized that the Finance Ministry would like to see another rate cut to help boost inflation, which currently remains low.

While acknowledging that the decision to adjust the policy rate lies within the MPC’s authority, Pichai noted that the Finance Ministry has consistently provided relevant economic data and engaged in detailed discussions with the Bank of Thailand on the matter.

On the topic of inflation management for 2025, Pichai stated that the Finance Ministry would present a framework for managing inflation to the Cabinet later this month before the Bank of Thailand takes over responsibility for implementing the target.

Regarding the nomination of a new chairman for the Bank of Thailand’s board, Pichai revealed that he is in the process of reviewing candidates, following the presentation of a shortlist by the Finance Ministry’s permanent secretary. The nomination process is expected to conclude by mid-January 2025.

Pichai also discussed the second phase of the government’s 10,000-baht cash handout program for individuals aged 60 and above, which is set to launch during the Chinese New Year celebrations next month. Preparations are underway for Cabinet approval.

Meanwhile, local research firms are predicting that the Bank of Thailand will hold the policy rate steady at 2.25% during Wednesday’s MPC meeting, in order to maintain flexibility amid growing uncertainties heading into the new year. They anticipate that the MPC may consider cutting rates again in February 2025.

Kasikorn Research Center (K-Research) expects a unanimous vote by the MPC to keep rates unchanged at 2.25%. The decision is likely based on the view that the current rate is neutral and aligned with economic conditions, inflation trends, and financial stability. K-Research also forecasts that the Thai economy will pick up in the fourth quarter, supported by seasonal tourism and government stimulus efforts, which may influence the MPC’s decision to maintain the policy rate.

At its October meeting, the MPC reduced the policy rate by 25 basis points—the first rate cut in four years—to bring the rate to a neutral level. K-Research anticipates two additional rate cuts in 2025, driven by emerging risks such as potential US tariff hikes on Thai exports and increased competition from Chinese products, which could negatively impact Thai manufacturers. Despite these risks, inflation in 2025 is expected to remain below the central bank’s target range of 1-3%.

However, the future direction of monetary policy remains uncertain. The timing and extent of any further rate cuts will depend on the evolution of economic conditions, inflation trends, and financial stability, according to K-Research.

Krungsri Global Markets and Research, under the Bank of Ayudhya (Krungsri), also expects the MPC to keep the policy rate at 2.25% in December. This approach would allow the committee to assess the impact of October’s rate cut and the government’s stimulus measures, while also preserving the policy space for future adjustments. Krungsri forecasts a rate cut to 2% in February 2025.

Similarly, Siam Commercial Bank’s SCB EIC research center expects the MPC to hold rates steady in December to maintain flexibility in responding to future uncertainties. However, SCB EIC anticipates a 0.25 percentage point rate cut in February 2025, in line with efforts to support liquidity amid growing downside risks to the Thai economy, especially in light of potential shifts in global policy, including the possibility of a “Trump 2.0” scenario.

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