The Bank of Thailand's (BoT) monetary policy committee (MPC) has come under pressure today following Prime Minister Srettha Thavisin's public call for a 25 basis point rate cut.
This underscores a persistent effort to press the BoT to reduce interest rates -- a move the government deems to be a vital mechanism to boost an economy it perceives to be in crisis.
The government also plans to secure loans exceeding 500 billion baht to finance its digital wallet handout scheme, and the MPC's meeting on Wednesday comes against the backdrop of a policy interest rate at its highest point in a decade, remaining at 2.50%.
On Tuesday, Mr Srettha doubled down on his call for the BoT to take action, saying a 25 basis point rate cut will help people, not increase inflation.
He said that inflation has been negative for months and below the lower end of the BoT's target range. Therefore, even after slashing the policy rate from 2.5% to 2.25%, there would still be plenty of room for cuts, he said.
"If a crisis or something happens, the rate can still be cut a lot further. Why don't we start doing it today?" said the prime minister, who also serves as the finance minister.
Mr Srettha said he would discuss the matter with the BoT governor.
"We have been in regular contact via the Fiscal Policy Office. We communicate in a straightforward manner without being aggressive," the prime minister said.
"Actually, inflation is not an issue. The problem is deflation. Now is time to cut interest rates. I would like the MPC to consider the matter at its meeting [on Wednesday]," he added.
Early last month, Mr Srettha posted on X, accusing the central bank of damaging the economy by keeping its interest rate elevated even though inflation has waned for months.
This followed his speech in parliament on Jan 3 that suggested the central bank should take into account risks to the nation's economy, including its fragile recovery, when deciding monetary policy.
"Monetary policy going forward should be in line with economic trends, tighter financial conditions and the boost from government policies," said Mr Srettha.
Kittiratt Na-Ranong, the premier's chief adviser, previously said a rate reduction is "the way out of economic problems", noting the central bank should support the government's policies.
Deputy Prime Minister and Commerce Minister Phumtham Wechayachai said that the government has been implementing fiscal policy to address the economic problems.
"The fiscal policy must go hand in glove with the monetary policy. I want to ask authorities who oversee the monetary policy. What action will they take? Will they reduce interest rates?" Mr Phumtham said, referring to the BoT.
"The responsibilities now lie with the BoT and authorities who handle the monetary policy. The two policies must be carried out together to address problems," he said.
Although the central bank has signalled it does not foresee a need to tighten rates further, BoT governor Sethaput Suthiwartnarueput's recent comments that the decline in consumer prices is a result of state subsidies shows the regulator may be hesitant about easing rates anytime soon.
However, analysts expect that at Wednesday's meeting, the MPC will prioritise stability and decide to leave the policy rate unchaged.
Phornchanok Cumperayot Kouwenberg, a lecturer at Chulalongkorn University's economics faculty, said that the BoT must be allowed to perform its duty independently in order to maintain economic stability.
The MPC began lifting rates in August 2022, increasing them by 0.25 percentage points eight times, bringing the borrowing cost to a 10-year high of 2.5% in September last year.
The committee halted the interest rate hikes in November 2023.
Thailand's policy rate is the lowest in Southeast Asia, with the average for the region 3.25% to 3.5%.
Inflation in Thailand is also lower than its regional peers'.
In light of the US Federal Reserve's delay in initiating rate cuts, analysts expect that the MPC will not lower its policy rate to prevent capital outflow.
Presently, the Federal Reserve's overnight federal funds rate stands at 5.5%, significantly higher than the BoT's 2.5% policy rate.