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Industry Leaders Call for Discussions with Central Bank on Suitable Policy Rate

Finance Ministry Advocates for Weaker Baht and Seeks Rate Cut in 2024

The ongoing debate about the appropriate policy rate amid the appreciation of the baht has prompted the Joint Standing Committee on Commerce, Industry and Banking (JSCCIB) to request a meeting with the Bank of Thailand to discuss the possibility of an interest rate cut.

The JSCCIB also intends to meet with Prime Minister Paetongtarn Shinawatra to present their proposed solutions for addressing the stagnant economy. The specific dates and times for these two meetings have yet to be confirmed.

Payong Srivanich, chairman of the Thai Bankers’ Association and a key member of the JSCCIB, noted that following the US Federal Reserve’s recent decision to cut its key interest rate by 0.5 percentage points, they are urging the central bank to consider a similar reduction in Thailand’s policy rate. In August, the Bank of Thailand’s Monetary Policy Committee (MPC) held the policy rate steady at 2.5%, which was described as consistent with the recovering local economy.

“We believe that reducing the policy rate will benefit the real sector, enhance people’s purchasing power, and stimulate economic growth,” Mr. Payong stated, referring to businesses that produce goods and services.

The JSCCIB anticipates a reduction in the policy rate by 0.25 percentage points this year, followed by another 0.25 to 0.5 percentage points next year, which they believe will positively impact the real sector. This outlook aligns with economists’ earlier predictions that the time is ripe to ease monetary policy to revitalize economic activity.

Research unit SCB EIC, under Siam Commercial Bank, forecasts the MPC will begin to cut the policy rate by 0.25 percentage points in December.

Central bank governor Sethaput Suthiwartnarueput emphasized that the MPC’s decisions will be guided primarily by three domestic factors: economic growth, inflation, and financial system stability. He reiterated that the central bank’s focus will remain on domestic conditions rather than simply mirroring any adjustments made by the US Federal Reserve.

Additionally, on Wednesday, the JSCCIB announced its plans to meet with the Finance Ministry to discuss potential adjustments to the inflation target, seeking a framework suited to the current economic environment. The existing inflation target is set at 1-3%.

Sanan Angubolkul, chairman of the Thai Chamber of Commerce, indicated that the group intends to explore ways to invigorate the economy and support small and medium-sized enterprises in navigating the current economic stagnation, as well as addressing the impacts of flood damage.

“The Thai economy is grappling with several challenges, including sluggish growth, the influx of low-cost products from China, and flood-related damages in numerous provinces,” Mr. Sanan commented.

He added that concerns about the impact of the baht’s appreciation on Thai exports have increased, as its value has risen from 36.8 to 32.3 against the US dollar in just three months, a gain of 12%.

Kriengkrai Thiennukul, chairman of the Federation of Thai Industries, noted that escalating conflicts in the Middle East threaten to raise shipping costs, while traders are worried about increasing global crude oil prices.

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