Thai central bank holds rate, deepening rift with government

THAILAND’S central bank left interest rates unchanged, refusing to yield to the demands of Prime Minister Srettha Thavisin to lower borrowing costs and signalling growing differences with the government over approaches to supporting South-east Asia’s second-largest economy.

The Monetary Policy Committee voted five to two to maintain the one-day repurchase rate steady at a decade-high 2.5 per cent, as predicted by 17 of the 24 economists surveyed by Bloomberg. The rest had expected a quarter-point cut.

The decision to extend the rate pause for a third straight time puts the Bank of Thailand at crossroads with the government, which believes the economy needs cheaper borrowing costs to boost credit and consumption to end a decade of average below 2 per cent growth. Srettha, who has stressed the need for coordinated fiscal and monetary actions, on Wednesday (Apr 10) headed a panel that approved funding for a controversial US$14-billion cash handout programme to stimulate the economy.

The prime minister is seeking to lift the economy’s growth to 5 per cent during his term from the current average sub-2 per cent expansion seen in the past decade. The central bank has argued that some of the problems holding back growth are structural and cannot be addressed by monetary policy, while dismissing months of negative inflation prints as a fallout of state subsidies. BLOOMBERG