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BOT Governor Defends Rate Policy Amid Govt Pressure
Bank of Thailand Governor Sethaput Suthiwartnarueput has underscored the importance of central bank autonomy in formulating monetary policy amid persistent disputes with the government regarding interest rates.
Key Takeways
- BOT Governor Sethaput Suthiwartnarueput emphasizes central bank independence amid government’s push for interest rate cuts to spur growth. BOT maintains that such cuts risk long-term stability through increased inflation and debt.
- The key interest rate remains at 2.50%, with the central bank attributing growth issues to structural factors. BOT warns against premature rate cuts, citing potential speculative risks and debt accumulation that could destabilize the economy.
- The government plans to launch a 450 billion baht “digital wallet” scheme to distribute 145 billion baht to vulnerable groups, aiming to boost the economy. Economists express concerns about the program’s fiscal sustainability. The BOT forecasts 2.6% economic growth this year and will review rates on October 16.
While the government has supported rate cuts to stimulate short-term growth, the BOT has maintained its stance, arguing that such measures could jeopardize long-term stability by increasing inflation and debt vulnerabilities.
Thailand’s key interest rate has remained at 2.50% for the past year, with the BOT resisting calls for a cut. The central bank stresses that structural issues are the primary factors restraining growth. It has cautioned that reducing rates too soon could lead to speculative risks and debt accumulation, potentially destabilizing the economy over time.
The government is set to roll out its 450 billion baht “digital wallet” scheme later this month. The program will distribute 145 billion baht to vulnerable groups, with each person receiving 10,000 baht to be spent in local communities. While the campaign is expected to inject life into the sluggish economy, economists, including former central bank governors, have raised concerns over its fiscal sustainability.
The BOT expects Thailand’s economy to grow by 2.6% this year, up from 1.9% in 2023, but the debate over interest rate policy and fiscal management continues. The central bank’s next rate review is scheduled for October 16.
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