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The Bank of Thailand keeps interest rates unchanged, despite government's public appeal.

TraderKnows
TraderKnows
06-12

Recently, the Thai government publicly urged the central bank to lower borrowing costs, but the central bank remains steadfast in not making any changes.

On Wednesday, the Bank of Thailand kept its key interest rate unchanged for the fourth consecutive meeting, despite government pressure to lower borrowing costs to help revive Southeast Asia's second-largest economy. This decision was in line with market expectations.

The Monetary Policy Committee of the Bank of Thailand (BOT) voted 6 to 1 to keep the one-day repurchase rate at 2.50%. One member voted for a reduction of 25 basis points.

In a statement, BOT said, "The majority of the committee members believe that the current policy rate is consistent with the economy moving towards its potential and supports maintaining macro-financial stability."

In a Reuters survey, 24 out of 27 economists expected BOT to keep the rate unchanged on Wednesday, while the remaining three predicted a 25 basis point cut.

Earlier on Wednesday, Thai Prime Minister Srettha Thavisin expressed his desire to see a rate cut at this meeting and reiterated calls for lower rates to help revive the economy. Thailand currently faces challenges such as high household debt, high interest rates, and weak exports, with its economic performance lagging behind other countries in the region.

However, Finance Minister Pridi Daochai expressed greater concern over people's access to credit rather than interest rates. He stated that the government's goal is to achieve at least 3% economic growth this year.

From August 2022 to September 2023, the BOT raised the key rate by 200 basis points over eight meetings to 2.50%, the highest level in over a decade, and has since kept it steady.

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Interest rate cut

A rate cut refers to the central bank adjusting the interest rate level so that it is lower than before, as a form of monetary policy. It is a means by which the central bank affects the supply and demand relationship in the money market, money creation, and the level of interest rates by changing the level of interest rates. Rate cuts are usually used to counter inflation, stimulate economic growth, or alleviate economic downturn pressures.

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