The Ministry of Finance has intensified its calls for the Bank of Thailand (BoT) to lower interest rates in order to stimulate the economy and weaken the baht, following a warning from a former influential governor against governmental interference with the central bank.
In an interview in Bangkok on Wednesday, Deputy Finance Minister Paopoom Rojanasakul expressed confidence that a rate cut could happen soon, potentially during the upcoming BoT policy meetings. He suggested that a 25-basis point reduction would be a positive first step, but indicated that ongoing monitoring and adjustments would be necessary.
According to Mr. Paopoom, the ideal exchange rate for the baht, currently at approximately 33.39 to the US dollar, should be around 34.5.
Prime Minister Paetongtarn Shinawatra, who assumed office less than two months ago, continues the efforts of her predecessor, Srettha Thavisin, to exert pressure on the BoT, which has consistently declined calls to lower the key interest rate from its current 2.5%—the highest rate since 2013.
Although Ms. Paetongtarn, daughter of former Prime Minister Thaksin Shinawatra, has not openly advocated for a rate reduction, various ministers, including Mr. Paopoom, have frequently urged for lower borrowing costs, citing low inflation rates and a sluggish economy.
Revitalizing Thailand’s lackluster economic growth, which has averaged under 2% annually over the past decade, is a primary goal for the new prime minister, who took office in August. In addition to implementing cash handouts to spur consumer spending, her priorities include persuading the central bank to reduce interest rates, addressing high household debt levels, and ensuring that the recent appreciation of the baht does not negatively impact exports or tourism.
Mr. Paopoom noted that recent flooding could harm the country’s economic growth this year and mentioned that the government is considering incentives to encourage consumer spending.
In its efforts to shift the BoT’s outlook, the government is also seeking to adjust the inflation target from the current range of 1% to 3% to a new level of 1.5% to 3.5%. There are reports of plans to appoint Kittiratt Na-Ranong, a critic of the BoT’s stringent monetary policy and a supporter of the ruling Pheu Thai Party, as the new BoT chairman, which could increase pressure on the current governor.
A panel of former bureaucrats and regulators failed to appoint a new chairman on Tuesday, stating that they needed more time to verify the qualifications of the candidates. This decision came after former BoT governor Tarisa Watanagase cautioned that government efforts to influence the appointment could lead to “disastrous consequences” for the economy.
Finance Minister Pichai Chunhavajira recently dismissed speculation that the government intends to install a politician in this role. He responded to inquiries from reporters about potential discussions with BoT governor Sethaput Suthiwartnarueput regarding monetary policy and the government’s economic relief strategies, saying, “Is it? BoT? Politician?”
