More economists speak up for BoT
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More economists speak up for BoT

Central bank independence in setting monetary policy and interest rates defended

(Photo: Bloomberg)
(Photo: Bloomberg)

A group representing 300 economists has spoken out in favour of the Bank of Thailand’s independence in setting monetary policy after government and business leaders stepped up calls for lower interest rates to support economic growth.

Pursuing an independent monetary policy is vital for the country’s economic stability as it prevents the misuse of monetary policy for short-term political goals while keeping inflation in check, the Economic Society of Thailand said in a statement.

The group is in the process of collecting signatures from its members to support the cause and plans a seminar on May 28 on the topic of strengthening the country’s economic structure over the medium and long term.

Prime Minister Srettha Thavisin and his allies have been loudly pushing for a rate cut — a move the central bank has repeatedly resisted, saying that lower borrowing costs won’t fix the economy’s problems.

The rift widened last week after the premier defended a statement by Pheu Thai Party leader Paetongtarn Shinawatra that the central bank’s autonomy posed an “obstacle” to reviving Southeast Asia’s second-largest economy.

That sparked speculation that the ruling coalition may seek to amend the central bank law guaranteeing autonomy. Mr Srettha and newly appointed Finance Minister Pichai Chunhavajira have denied any such move is planned, but both have underlined the need to align monetary and fiscal policies to revive the economy.

Mr Pichai, for his part, has said he intends to hold talks with central bank governor Sethaput Suthiwartnarueput to ease tensions and ensure that both economic engines — monetary and fiscal — are working together.

Mr Sethaput has said that political pressure won’t sway the central bank’s independent interest rate decisions. He also maintains that the country’s economic problems are structural in nature and stimulus alone will not achieve much.

“Politicians shouldn’t act to threaten or put pressure on the central bank independence in public,” Nipon Poapongsakorn, head of the group of economists and distinguished fellow at the Thailand Development Research Institute, said in the statement.

“We ask those who are responsible for both fiscal and monetary policies to cooperate to maintain economic stability.”

They can debate on the basis of data, but should let central bank independence be as it is, he said.

The country’s top business lobby also weighed in on the interest-rate on debate Wednesday, supporting the government’s call for lower borrowing costs.

The central bank has kept borrowing costs at a decade high 2.5% since September. It said last month that holding the rate steady has given it more options to deal with currency volatility, geopolitical risks and uncertainties stemming from the timing of rate cuts by the US Federal Reserveg.

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