Thailand’s monetary policymakers will weigh the need to adjust the central bank’s neutral interest-rate stance at its meeting next month after reviewing any structural drags on economic growth, Bank of Thailand Assistant Governor Piti Disyatat said.
The Monetary Policy Committee (MPC) would consider if there is a need or not to recalibrate, as well as the appropriate timing for such a move, Piti said in an interview with Bloomberg Television on Friday. The MPC is due to meet on April 10.
“It’s hard to prejudge the decision right now, but whatever is being considered is more like a recalibration rather than an easing cycle to support the economy,” he said, adding that the economy is actually recovering.
His comments come amid rising bets for lower interest rates. Economists including Bangkok-based Siam Commercial Bank are penciling in a rate cut at the April meeting, given still weak economic readings. The central bank has so far resisted repeated calls from Prime Minister Srettha Thavisin to urgently lower borrowing costs to boost consumption and economic growth.
Consumer prices printing negative since October was cited by Mr Srettha as evidence of waning demand in the economy. While the BoT explained the spell of disinflation as an effect of government subsidies, other indicators are also pointing to sluggish demand.
Factory output has shrunk for more than a year, while business sentiment has deteriorated for five straight months since October. Thailand’s automobile sales slumped to a 29-month low in January, as banks rejected about 50% of total auto loan requests amid alarming household debt levels. That’s contributed to the economy’s expansion remaining the slowest among Southeast Asian peers.
“It is true that there seems to be slower trend growth than we had anticipated, maybe looking back a year or two years ago,” Mr Piti said. “That would figure in whether there is a need or not to recalibrate the neutral stance.”
He said it depends also on the strength or the stage of the cyclical recovery in the first half of this year, while counting any delay in actual budget spending as a key risk to supporting growth.
The BoT has maintained that the current rate is at a neutral level, where it is supportive of growth while also helping check inflation. Still, a 5-2 vote for standing pat at the last policy review — the first split decision in nine meetings — signalled the readiness of some rate-setters to drive borrowing costs down.
The nation’s lawmakers are on Friday expected to pass a nearly 3.48 trillion baht annual spending plan for the 2024 fiscal year, clearing the way for Mr Srettha’s administration to ramp up public investment. The budget, which has been delayed since October last year during a transition to the new government, is expected to provide a prop to growth through fiscal steps.