The Bank of Thailand left its key interest rate unchanged on Wednesday, as widely expected, after delivering a surprise cut at its previous meeting in October.
The Monetary Policy Committee voted unanimously to keep the one-day repurchase rate at 2.25% at its final meeting of 2024.
The central bank sees the current rate as “consistent” with the economic outlook and inflation that is trending towards its target range, along with the maintenance of economic and financial stability in the face of “higher uncertainties” going forward, it said in a statement.
The Bank of Thailand has stressed the importance of maintaining its neutral stance as the economy picks up and inflation slowly rises toward its 1-3% target.
We remain neutral — we are not stepping on the brake and we are not accelerating,” assistant governor Sakkapop Panyanukul said at a press conference. “Over the short term, the economic recovery remains on track, but we see higher risks ahead.”
Governor Sethaput Suthiwartnarueput said earlier this month that the bank would pursue a “robust” monetary policy that can effectively cope with high uncertainties and unintended consequences facing the global economy.
The baht was down 0.1% against the US dollar after the rate announcement, while the Stock Exchange of Thailand was little changed from Tuesday, when the SET Index fell below 1,400 points.
All but two of 30 economists in a Reuters poll had predicted the key rate would be held steady this week. The median forecast in the poll was that rates would be cut by 25 basis points by mid-2025.
Wednesday’s decision came in the face of continuing calls by the Pheu Thai government for lower interest rates to stimulate the economy.
Finance Minister Pichai Chunhavachira has argued that inflation has been below 1% for several months and that is not a sign of a growing economy.
Southeast Asia’s second-largest economy has lagged its regional peers in recent years, saddled by high household debt and borrowing costs, and weak exports. Last year’s GDP growth was 1.9%.
The central bank has countered that low inflation reflects the impact of populist fuel subsidies and is not an accurate reflection of conditions.
The BoT predicted 2024 headline inflation at 0.4%, down from 0.5% forecast earlier. It forecast headline inflation at 1.1% in 2025, down from a previous prediction of 1.2%. It maintained its forecast of 2.7% economic growth for 2024, improving to 2.9% in 2025.
Mr Sethaput said earlier that policymakers were in no rush to follow up on their Oct 16 interest rate cut, which he considered a one-off event.
Supavud Saichuea, chairman of the National Economic and Social Development Council, also said recently that monetary policy should take a central role in driving economic growth next year, while fiscal policy diminishes as a tool to address the fiscal deficit.
Because of the need to reduce the deficit, the government is expected to scale back economic stimulus around mid-2025, he said.
Consequently, he said, monetary policy decisions by the central bank will take on a more crucial role to sustain momentum in the Thai economy.
He predicted the MPC would begin cutting the policy rate in the second half of 2025, reducing the benchmark rate from 2.25% to 1.5% by the end of the year.