Finance Ministry urges ‘suitable’ policy rate
Bank of Thailand asked to adopt policies that will boost economic growth and maintain 1-3% inflation
The Finance Ministry has called upon the Bank of Thailand (BOT) to employ monetary policies that facilitate economic growth, including setting a suitable policy rate, in a bid to keep the bank’s proposed inflation framework of 1-3%.
Deputy PM and Finance Minister Pichai Chunhavajira met on Tuesday with BOT governor Sethaput Suthiwartnarueput to discuss monetary and financial policies before setting the target inflation framework for fiscal 2025 to present to the Cabinet meeting in December.
Thailand has been setting the target for headline inflation at 1-3% in the past nine years, but inflation in three of those years (2018, 2021, 2023) has failed to meet the target.
"Setting an inflation target framework is a secondary issue since inflation can fluctuate based on various factors such as investment, revenue, and purchasing power. Therefore, setting the inflation target at 1-3% may not have significant effects,” Pichai said after the meeting.
He said the ministry is willing to maintain the previous target of 1-3%. However, the actual inflation rate must be above 1% and can move up to an appropriate point or the median of 2%, he added.
“To keep the inflation rate at a suitable level, the BOT and Monetary Policy Committee (MPC) must employ monetary policies that facilitate economic growth,” said the minister. “This includes setting a suitable policy rate which will help boost foreign direct investment and maintain Thailand’s competitiveness against competitors.”
Pichai said he also called upon the central bank to roll out measures to help alleviate the debt burden of the public and SME operators, which will also help boost investment and the expansion of new loans. He suggested that the BOT come up with a comprehensive debt restructuring plan in two weeks.
"Thailand's economy has not been growing at a particularly high level. In 2023, the economy expanded by 1.9% and is expected to grow by 2.7% in 2024,” said Pichai.
“For 2025, the growth is projected to be close to 3%, based on current measures. If we want the economy to grow beyond this target, we need to significantly adjust our measures. The BOT understands the government's intentions and shares the same goals,” he said.
On October 15, the MPC voted 5 to 2 to cut the policy rate by a 0.25 percentage point from 2.50% to 2.25%, effective immediately. It was the first rate cut in four years.
The MPC agreed that a neutral stance on the policy rate remains appropriate, given the economic growth and inflation outlook. Most members thus voted to cut the policy rate by 25 basis points to alleviate debt-servicing burden for borrowers.
Following the rate cut, Sethaput said the central bank will not be rushing to follow up on another cut anytime soon, adding that the bank’s future actions would be guided by the outlook on inflation, economic growth and financial stability.
