Thailand’s Ministry of Finance has intensified its push for the Bank of Thailand to reduce interest rates in a bid to stimulate economic growth and devalue the baht, shortly after a prominent ex-governor cautioned against governmental interference in the central bank’s affairs.
Deputy Finance Minister, Paopoom Rojanasakul, expressed confidence in a potential rate cut either in the upcoming monetary policy meeting or the subsequent one. He suggested that a 25 basis point reduction would be a favorable initial step, but acknowledged the necessity for ongoing vigilance and adjustments to ascertain its efficacy.
Paopoom also highlighted that the current exchange rate of the baht, standing at approximately 33.39 against the US dollar, should ideally settle at 34.5 to foster economic competitiveness.
According to Reuters Poll, the Bank of Thailand is unlikely to cut interest rates this year as policymakers will look into easing borrowing costs in the second half of 2025.
The next policy meeting is scheduled on October 16, 2024.
Conversely, the baht’s strengthening trend, triggered by speculations of reduced U.S. interest rates following the Federal Reserve’s recent easing measures, came to an abrupt halt at the close of September. However, a 6% strengthening against the greenback was noticeable in September.
Some economists view that the Bank of Thailand is hesitant to implement rate cuts due to concerns that it could prompt a baht selloff and capital outflows. The BOT governor emphasized that the central bank is not unnecessary following the Federal Reserve’s proactive monetary policy adjustments in September.
