Thailand’s central bank, under pressure from the government to cut interest rates, could adjust monetary policy if the outlook for the economy changes and structural challenges clearly reduce its long-term potential growth, a deputy governor said.

The Bank of Thailand’s (BOT) monetary policy committee (MPC) is open to all input, but needs to balance immediate and longer-term economic factors when setting rates, deputy governor Alisara Mahasandana told Reuters.

Prime Minister Srettha Thavisin, who is also the finance minister, has openly challenged the central ank over its monetary policy, repeatedly saying rate cuts would help the economy cope with high household debt and China’s slowdown.

“The MPC welcomes and values input from all stakeholders... But when it comes to a monetary policy decision, the MPC needs to weigh between short-term and long-term impacts on monetary policy objectives... and they could have different views,” Alisara said, speaking on the sidelines of the International Monetary Fund and World Bank Spring Meetings in Washington.

Monetary policy could be “recalibrated” if there was a change in the growth and inflation outlook, and if structural impediments “clearly lower our long-term potential growth”, said Alisara, who is a member of the policy committee.

The central bank kept the key interest rate steady at 2.50 per cent, its highest in over a decade, in a majority decision on April 10. The next review is on June 12.

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The central bank forecasts South-east Asia’s second-largest economy will grow 2.6 per cent this year and 3.0 per cent in 2025, picking up from last year’s 1.9 per cent. Alisara said that while higher private consumption and tourism were expected to bolster growth, uncertainties remained, including how well will its exports recover.

She said annual headline inflation was expected to return to the BOT’s target range of 1-3 per cent by the end of the year. Energy subsidies have kept consumer prices below year-ago levels for six straight months to March, driven by energy subsidies, but prices are expected to rise in May.

Alisara, said negative headline inflation “does not reflect weak demand, it’s not deflation”.

The Thai baht is expected to be volatile, driven by external factors, especially dollar strength, she said. The baht has fallen 7.6 per cent against the US currency so far this year, becoming Asia’s second-worst performing currency behind the yen.

While a lower-yielding baht lagged other regional currencies, domestic factors should be more supportive than last year, Alisara said, noting improved economic activity and Thailand’s current account surplus. REUTERS