Bank of Thailand holds key interest rate at 2.50% in a 5-2 decision

The BOT’s Monetary Policy Committee (MPC) voted 5:2 in favour of holding the rate, which is almost a decade high. The decision follows weeks of back-and-forth between government figures and BOT Governor Sethaput Suthiwartnarueput.

The central bank said the MPC believed that while headline inflation was projected to be lower than forecast, it was not a sign of low demand, as falling prices were concentrated in sectors like food and energy. Headline inflation excluding subsidies remained positive.

Earlier in the week, a Ministry of Commerce report detailed falling year-on-year inflation in January for the fourth month in a row. It prompted Prime Minister Srettha Thavisin and Deputy Finance Minister Julapan Amornviwat to point to the figure, insisting that it indicated an economic slowdown.

"What we're seeing is a recovery that is there, but is slower than expected," Sethaput told news agency Reuters. "That's not the same thing as a crisis. It's a temporary thing, and the long-term inflation expectations are still positive and anchored," Sethaput said.

Meanwhile, figures from the private sector were expecting an interest rate cut. Suphan Mongkolsuthee, former president of the Federation of Thai Industries, said, “Household debt is so high, almost 100% of our GDP, that it makes sense for us to cut interest rates while inflation is negative.”

Additionally, at Wednesday morning’s Joint Standing Committee on Commerce, Industry, and Banking (JSCCIB) meeting, the committee, serving as a private sector interest group, expressed confidence in the central bank’s decision-making, adding the BOT would take economic indicators, such as inflation, into account.

The BOT expects financial conditions to remain stable and expects inflation to stabilise at 1% for the year before increasing in 2025. However, the situation in the Middle East and the effects of climate change on agriculture remain key risks.