30-5-2024 (BANGKOK) Thailand’s central bank remains open to adjusting interest rates if the outlook for the economy and inflation shifts, according to Deputy Governor Alisara Mahasandana. However, she emphasized that interest rates are not considered a primary factor in boosting the nation’s economic performance.
In a recorded media program aired on Wednesday, Alisara stated that the Bank of Thailand’s inflation target range of 1 percent to 3 percent is still appropriate for the time being. She added that headline inflation is expected to return within the target range by the fourth quarter of 2024.
The central bank left its key interest rate unchanged at 2.50 percent, a more than decade-high level, during its last review in April. The next rate decision is scheduled for June 12.
Alisara clarified that any potential rate adjustments would depend on the economy, inflation, and financial stability considerations, rather than being influenced by moves made by the U.S. Federal Reserve.
Regarding the Thai baht, Alisara noted that the central bank aims for the currency to move in line with market forces but would intervene in case of excessive volatility.
On the economic front, Thailand’s first-quarter annual growth of 1.5 percent exceeded the central bank’s expectations, exhibiting positive momentum, according to Alisara. The central bank has forecast a growth rate of 2.6 percent for the year 2024, following a 1.9 percent expansion in 2023.
Prime Minister Srettha Thavisin had previously called for the central bank to cut interest rates to support Southeast Asia’s second-largest economy, which has lagged behind regional peers in its recovery. However, the newly appointed Finance Minister, Pichai Chunhavajira, recently expressed greater concern over access to credit than the level of interest rates.
The central bank has maintained its stance that rate cuts and fiscal stimulus alone would not significantly aid the economy. Instead, the bank favors structural reforms aimed at increasing productivity as a more effective measure for economic growth.
While open to rate adjustments, the Bank of Thailand’s primary focus appears to be on fostering financial stability and maintaining inflation within the target range. The central bank’s approach suggests a balanced approach, where interest rates are considered one tool among many to support the economy, rather than being viewed as a panacea for economic challenges.
