The Bank of Thailand (BoT) may consider adjusting monetary policy in response to shifting economic conditions and challenges affecting long-term growth potential, according to BoT deputy governor Alisara Mahasandana.
Alisara mentioned that the Monetary Policy Committee of the central bank is receptive to various inputs but must carefully balance short-term and long-term economic factors when determining interest rates.
Prime Minister Srettha Thavisin, who also serves as the finance minister, has been vocal in urging rate cuts from the central bank to address high household debt and the slowdown in China, challenging the bank’s monetary policy decisions.
Alisara stated at the IMF and World Bank Spring Meetings in Washington that monetary policy could be adjusted if there are alterations in growth and inflation projections or if structural obstacles significantly impede long-term growth potential.
The BoT maintained the key interest rate at 2.50%, its highest level in more than a decade, during its April 10 meeting, with the next review scheduled for June 12.
The central bank’s forecast predicts a growth of 2.6% in the Thai economy for this year, rising to 3.0% in 2025, an improvement from the 1.9% growth recorded last year.
Alisara highlighted expected growth drivers such as increased private consumption and tourism but noted persisting uncertainties, particularly in the recovery of exports.
She mentioned that annual headline inflation is projected to return to the BoT’s target range of 1-3% by the end of the year, with consumer prices anticipated to increase in May after being held down by energy subsidies.
Alisara clarified that negative headline inflation does not indicate weak demand or deflation but is a response to energy subsidies affecting consumer prices.
Regarding the baht’s performance, she anticipated volatility driven by external factors, including the strength of the US dollar. The baht has depreciated by 7.6% against the US dollar this year, ranking as Asia’s second-weakest currency after the yen.
Despite the baht’s lower yields compared to other regional currencies, Alisara pointed out that domestic factors are more favorable this year, supported by enhanced economic activity and Thailand’s current account surplus.
