The Bank of Thailand is not doing enough to manage fluctuations in the baht, Deputy Finance Minister Paopoom Rojanasakul said on Tuesday, adding that the root cause was interest rates that are not aligned with the economy.
The baht this week rose to a 31-month high, trading at 32.40 to the dollar. Mr Paopoom said 34 baht was a more suitable level. The government has repeatedly pushed for a rate cut, arguing it is necessary to revive the economy.
The Bank of Thailand acknowledged this week that it had intervened in the market to manage the value of the baht, without elaborating on the nature of the intervention.
Finance Minister Pichai Chunhavajira said on Tuesday that he had spoken with central bank governor Sethaput Suthiwartnarueput about the strong baht and the bank’s inflation target.
An agreement on an inflation target should be reached this month, he added.
Mr Pichai’s comments came ahead of meeting between the ministry and the central bank this week to discuss the inflation target and the currency.
The baht has risen 5.2% since the beginning of the year, making it the region’s second-best performing currency after the Malaysian ringgit.
The baht’s rapid appreciation has been hitting exports and tourism spending, two key drivers of Southeast Asia’s second-largest economy.
The baht, inflation target and interest rates are all connected, Mr Pichai said.
“We have spoken and are always in discussion. … These issues require preparing a lot of information,” he told reporters.
“It’s not a one-time thing,” he said, adding that the central bank said that it had been managing the baht.
A review of the 1-3% inflation target range, which has been in place since 2020, could raise the chance of a rate cut.
The central bank has so far resisted calls for easing and held the benchmark rate at 2.50% for a fifth straight meeting in August. Mr Sethaput has said that just because the US Federal Reserve has started cutting rates, it doesn’t mean other countries have to move in lockstep. The next rate review is on Oct 16.
The Thai economy grew at a faster pace of 2.3% in the second quarter, but analysts said fiscal policy uncertainty has clouded the outlook.
The central bank has forecast economic growth of 2.6% this year, after 1.9% expansion last year.