Thai PM Persistently Pressures Central Bank to Cut Rates

Thailand’s Prime Minister Srettha Thavisin made a statement before the meeting of the cabinet, urging the Monetary Policy Committee to consider the possibility of interest rate cut as he elaborated that the benchmark is still high even if the central bank cuts the current rate from 2.5% to 2.25%.

The Thai PM continues to pressure the central bank to cut rates, but analysts are not jumping on the train just yet.

The Bank of Thailand is expected to keep its key interest rate unchanged at the meeting this week and could leave it there until early 2025, according to the consensus from LSEG.

Mr. Srettha has repeatedly said that the Thai economy is in a “crisis” situation and urged the Bank of Thailand to cut interest rates as inflation has now been lower than the central bank’s target range of 1-3% for the ninth consecutive months, including the inflation in January inflation data this Monday.

However, the Bank of Thailand Governor Sethaput Suthiwartnarueput begs to differ with the PM statement, saying that Thailand is not in a crisis and the benchmark rate is at a neutral level that the central bank may not see a change in policy rates anytime soon.

According to 27 economists from a Reuters poll, the benchmark will be kept at 2.50% at the meeting this week, while 70% of the poll expected no change at all this year. Meanwhile, 8 of 15 economists expected the first rate cuts to be in March 2025.

Thailand’s headline consumer price index (CPI) in January dropped more than expected to its lowest level in 35 months. Still, it is expected that the price will return to the central bank’s target range in the second quarter of this year.

Despite the consensus, some economists expected that the market could see an earlier rate cut than anticipated if the outturn for GDP disappoints. In this case, the cut could be as soon as the final quarter of this year.

The Governor of Thailand’s central bank also noted that the growth and inflation outlook for 2024 is lower than they were in the forecast made last November.