Thailand's central bank defended its monetary policy stance as "robust" enough to withstand volatility from United States President Donald Trump's latest tariffs on trading partners, signalling that it may refrain from further easing after last week’s surprise cut.
"Our latest cut is calibrated to be robust to many scenarios including the escalation of tariffs," Bank of Thailand (BoT) deputy governor Piti Disyatat said in a Bloomberg TV interview on Tuesday in Bangkok. Mr Piti is part of the BoT's seven-member Monetary Policy Committee (MPC).
Despite Trump doubling his planned tariffs on China to 20%, the BoT's latest interest-rate cut to 2% is adequate to address any fallout on the global and domestic economy, Mr Piti said. The bulk of the impact of US tariffs on China will come from the "first 10%" Trump initially signalled, and it remains to be seen what the additional 10% may do, he added.
"For the foreseeable future, the stance we have is able to accommodate these shocks," Mr Piti said. "It will take a quite substantial further negative shock for us to reconsider our stance."
The BoT last week surprised the market with its second policy rate cut in just four months to bolster Southeast Asia's second-largest economy. The easing came after disappointing growth data and a direct appeal from Prime Minister Paetongtarn Shinawatra, whose administration has pushed for lower borrowing costs and a higher inflation target to stimulate consumption and lending.
While the central bank did not officially revise its forecast for 2.9% gross domestic product growth this year, officials said the expansion will likely come in at just over 2.5%. Thailand’s GDP grew 2.5% in 2024, less than economist estimates and just half the pace of neighbouring Indonesia.
In a report responding to Mr Piti's comments, Standard Chartered economist Tim Leelahaphan characterised the BoT's overall tone as "neutral to dovish" and wrote that he expects economic forecasts to be revised downward at the April meeting. While he expects the BoT to wait until June to bring down its key rate to 1.75%, he also sees a risk of the cut being done as early as next month.
Trade spillovers
BoT governor Sethaput Suthiwartnarueput said last month that he considers trade policy spillovers as the central bank's main challenge, warning it is “particularly hard” to handle shocks from the supply side. His deputy aired the same concerns on Tuesday, just hours after Trump ratcheted up his tariff threats against China, Mexico and Canada.
"If the price war gets more intense, then there is a risk that imports from many countries, including China, will intensify," Mr Piti said. Thailand may also be indirectly affected by lower demand for Chinese goods because Thailand is part of the supply chain of shipments to China. He added that the central bank is watching the manufacturing sector, particularly automakers, "quite closely."
The government has urged the central bank to ensure the baht remains competitive for exporters as the trade-reliant nation draws up plans to boost annual growth above 3%. The Thai currency has advanced more than 5% against the US dollar in the past 12 months, threatening the country's key export and tourism sectors, while the currencies of neighbours Indonesia and the Philippines have dropped more than 3% over the same period.
Bank of Thailand deputy governor Piti Disyatat. (File photo)
The baht movements have mainly reflected Thailand’s fundamentals so far and "we don't see major issues with level of the exchange rate," Mr Piti said. The central bank will keep watching for any excessive volatility that could affect company cash flows and amplify shocks in the economy, he said.
There has been an ongoing dispute between the government and the central bank on the best way to boost the economy, with sparring over monetary policy and the inflation target.
The nation is set to appoint a former bureaucrat as the new BoT chairman. Somchai Sujjapongse, 63, was seen as a compromise candidate after the government's first pick, ex-finance minister Kittiratt Na-Ranong, was publicly opposed by former governors and economists, and ultimately deemed unfit due to his links to the ruling Pheu Thai Party.
Mr Piti said the BoT is "very happy" with the conclusion of the selection process for the new board chairman and the agency looks forward to working closely with Mr Somchai.
"We have always had a good working relationship and there’s no reason why that should not continue," he said.