The Ministry of Finance ratcheted up pressure on the Bank of Thailand (BoT) to cut interest rates to boost the economy and weaken the baht, just a day after an influential former governor warned against government meddling in the central bank.
"It's highly possible they will cut this year either this meeting or next meeting," Deputy Finance Minister Paopoom Rojanasakul said in an interview in Bangkok on Wednesday, a week ahead of the BoT's next monetary policy decision. "A 25-basis point cut would be a good start, but whether that is enough or not, we will need to keep monitoring and adjusting.”
The appropriate level for the baht, which is now around 33.39 to the US dollar, should be 34.5, Mr Paopoom said.
Prime Minister Paetongtarn Shinawatra, who took office less than two months ago, is continuing her predecessor Srettha Thavisin's efforts to tighten its grip over the BoT, which has ignored repeated calls to cut the key interest rate from 2.5%, the highest level since 2013.
While Ms Paetongtarn, daughter of former premier Thaksin Shinawatra, has not directly pushed for a rate cut herself, ministers including Mr Paopoom have repeatedly called for lower borrowing costs, citing low inflation and the stuttering economy.
Boosting Thailand's moribund growth, which has averaged less than 2% a year for the past decade, is a top priority for the prime minister, who took office in August. Aside from rolling out cash handouts to boost spending, priorities include convincing the central bank to cut interest rates, reducing high levels of household debt, and ensuring the recent rise in the baht doesn’t undermine exports or tourism.
Mr Paopoom, 41, warned that recent floods may negatively affect this year’s economic growth, and said authorities are mulling incentives to boost consumption.
In its campaign to change the central bank's stance, the government is also pushing to raise the inflation target from 1% to 3% to 1.5% to 3.5%, people familiar have said. There has been manoeuvring to place Kittiratt Na-Ranong, a critic of BoT's hawkish monetary policy and a loyalist of the ruling Pheu Thai Party, in the key role of BoT chairman, which could add pressure on the governor.
A panel of retired bureaucrats and regulators failed to pick the chairman on Tuesday, seeking more time to thoroughly verify details of the qualification of nominees. That came after former BoT governor Tarisa Watanagase warned the government's attempts to influence the appointment could lead to "disastrous consequences" for the economy.
On Tuesday, Finance Minister Pichai Chunhavajira turned a deaf ear to speculation the government aims to appoint a politician to the role.
He was addressing reporters' questions about possible discussions with BoT governor Sethaput Suthiwartnarueput regarding monetary policy and the government's economic stimulus measures when the topic was raised.
He responded: "Is it? BoT? Politician?"
Former finance minister and ex-Thai football national team manager Kittiratt Na Ranong. (File photo)