Central bank chief prepares for meeting with Srettha

Central bank chief prepares for meeting with Srettha

Bank of Thailand governor Sethaput Suthiwartharueput delivers an address at a digital finance conference on Sept 14.
Bank of Thailand governor Sethaput Suthiwartharueput delivers an address at a digital finance conference on Sept 14.

The Bank of Thailand governor is ready to meet the prime minister following the central bank's policy rate hike and its decision to cut the GDP forecast for 2023.

Governor Sethaput Suthiwartnarueput said on Friday he would meet Prime Minister Srettha Thavisin on Monday, but did not provide details regarding the agenda. He said he is ready to answer any questions during the meeting.

Mr Srettha insisted he never considered dismissing Mr Sethaput, who recently voiced some criticism of the government's 10,000-baht digital wallet scheme.

Mr Srettha, who is also the finance minister, issued the denial during a media interview in New York on Wednesday. Despite issuing the denial, the rumour has continued to spread.

The Bank of Thailand's Monetary Policy Committee (MPC) voted on Wednesday to raise its benchmark interest rate by a quarter-point to 2.5%, the highest level in a decade.

Moreover, the MPC cut its growth forecast for 2023 from 3.6% to 2.8%, although the outlook for next year was raised from 3.8% to 4.4%.

Mr Sethaput said on Friday the MPC decided to increase the rate based on an outlook-dependent approach rather than a data-dependent version, considering economic circumstances over the long term.

The central bank believes the country's economic recovery is intact, driven by tourism and private consumption, even though foreign arrivals were lower than expected in the second quarter.

"Both the policy rate of 2.5% and the 10-year government bond yield are now at the lowest levels in the region, based on Thailand's economic circumstances," he said.

"The current policy rate was close to a neutral level, in line with our assessment, and we will maintain the policy rate at the existing level for a while."

Thailand's policy rate is lower than several other countries in the region, such as Indonesia (5.75%), Malaysia (3%) and the Philippines (6.25%).

The central bank on Wednesday predicted headline inflation of 1.6% this year and 2.6% next year.

Inflation is expected to remain within the bank's target range of 1-3% over the long term.

The MPC said financial stability is a key factor in monetary policy decisions.

Mr Sethaput said financial volatility has picked up because of rising bond yields and baht depreciation against the US dollar, related to both internal and external factors.

Baht volatility against the greenback this year is similar to the yen and won, according to the MPC.

The Japanese and South Korean currencies are normally more volatile compared with the dollar than other currencies in the region.

Net foreign fund outflows were US$8.8 billion year-to-date, for both equity and bond markets.

However, the MPC does not factor foreign fund outflows and inflows into its policy rate considerations, Mr Sethaput said.

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