Bank of Thailand chief chided over revealing policy stance
text size

Bank of Thailand chief chided over revealing policy stance

Finance minister concerned by revelation to foreign media

Listen to this article
Play
Pause
The Bank of Thailand governor gave an interview in Washington, DC suggesting the regulator is not in a hurry to follow up on its recent rate cut. (Photo: Bloomberg)
The Bank of Thailand governor gave an interview in Washington, DC suggesting the regulator is not in a hurry to follow up on its recent rate cut. (Photo: Bloomberg)

Finance Minister Pichai Chunha-vajira has cautioned the Bank of Thailand (BoT) governor for saying during an interview with foreign media that it is not Thailand's policy to make continuous interest rate cuts, following the central bank surprisingly trimming the country's policy rate by 0.25 percentage points to 2.25% on Oct 16.

According to Mr Pichai, the central bank governor should keep the country's policy to himself on such matters because if this information is made public, it would provide currency traders with an advantage.

Regarding whether the government has expressed a desire for continuous interest rate cuts, Mr Pichai said the government wants the decision to be appropriate for the situation, and that any rate decision should not be explicitly declared.

In an interview with Bloomberg Television on Tuesday in Washington, DC, central bank chief Sethaput Suthiwartnarueput signalled that policymakers will not be rushing to follow up on last week's interest rate cut, while also defending the current inflation target amid government calls to ease the policy rate further and lift the price goal.

Mr Sethaput was in Washington to attend the annual meetings of the International Monetary Fund (IMF) and World Bank.

"Given that we just recalibrated, I think the bar for making further rate moves has to be reasonably high," he said.

Sethaput: Slow credit growth a factor

Sethaput: Slow credit growth a factor

Slowing credit growth was one factor that convinced the central bank to cut the key rate for the first time in more than four years, said Mr Sethaput.

Future actions will be guided by the outlook for inflation, economic growth and financial stability, he said.

The governor's remarks suggest the monetary authority will take its time in reducing borrowing costs. That puts it on a collision course with Prime Minister Paetongtarn Shinawatra's government, which continues to push for lower rates and a higher inflation target to energise a sluggish economy.

"The pressure has been there, it is there, and it will continue to be there," Mr Sethaput said of the government's attempts to influence the central bank. "Yet that wasn't the main reason for our rate decision."

Mr Sethaput, who is meeting with the finance minister later this month to agree on next year's inflation target, said the current framework of a 1% to 3% band has served the economy well.

This range has kept price expectations anchored and enabled the central bank to deliver a moderate tightening cycle at a time when neighbours jacked their rates up much higher, he said.

"If you move the band upwards, it would cause expectations to move up and consequently shift the cost of living higher, and bond yields along with it," said Mr Sethaput.

Mr Pichai said the meeting with the central bank to discuss the inflation framework should be in the next few days.

Regarding the central bank wanting to maintain the inflation framework at 1% to 3%, Mr Pichai said the issue needs to be discussed rationally, taking into account previous data.

Do you like the content of this article?
12 41
COMMENT (18)

By continuing to use our site you consent to the use of cookies as described in our privacy policy and terms

Accept and close