THAILAND’S central bank left its key interest rate unchanged for a second straight meeting on Wednesday (Feb 7), as expected, resisting government pressure to reduce borrowing costs to revive faltering growth.

The Bank of Thailand’s (BOT) monetary policy committee in a 5-2 vote decided to hold the one-day repurchase rate at 2.50 per cent, the highest in more than a decade.

It had raised the rate by 200 basis points since August 2022 to curb inflation. Two members voted for a cut of 25 basis points.

All 27 economists in a Reuters poll had predicted the BOT would hold the rate steady on Wednesday, while saying the first rate cut was more likely to come earlier than they expected.

“The current policy interest rate is consistent with preserving macro-financial stability,” the BOT said in a statement.

“Most members thus voted to maintain the policy rate at this meeting. Two members voted to cut the policy rate by 0.25 percentage point, to reflect a lower potential growth as a result of structural challenges.”

GET BT IN YOUR INBOX DAILY

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign UpVIEW ALL

The central bank said it stood ready to adjust rates as appropriate.

The dissenting votes “has started the countdown to an easing in rates,” Kobsidthi Silpachai, head of capital markets research of Kasikornbank said in note.

The BOT said the economy was growing slower than expected and would be supported by domestic demand, though structural impediments, particularly deteriorating competitiveness, would further hamper growth.

The baht was down slightly at 35.580 against the dollar after the announcement.

The decision was a disappointment for the government.

“I don’t agree with the decision, but I accept it,” Prime Minister Srettha Thavisin told reporters on Wednesday. He had previously called for a rate cut to boost growth in South-east Asia’s second-largest economy, which he has described as in crisis, a depiction the BOT chief has rejected.

Srettha, who is also the finance minister, has been at loggerheads with the central bank over the direction of monetary policy, also arguing that his policy to give away US$14.3 billion through a digital wallet was crucial for the economy.

Input from the government was “a useful debate”, BOT assistant governor Piti Disyatat told reporters, adding there is was an ongoing discussion on the economy.

BOT governor Sethaput Suthiwartnarueput recently told Reuters that monetary policy was “broadly neutral” and the economy was not in crisis, but needed structural reforms.

On Wednesday, the BOT lowered its 2024 growth outlook to 2.5 to 3 per cent from 3.2 per cent. The economy expanded 2.6 per cent in 2022.

Consumer prices have fallen for four consecutive months year-on-year through January, driven by energy subsidies, below the central bank’s target range of 1 to 3 per cent.

The central bank said that it saw headline inflation near 1 per cent this year and saw inflation picking up in 2025.

“With growth set to remain weak and inflationary pressures very subdued, we think the central bank will loosen monetary policy later in the year,” said Capital Economics analyst Gareth Leather. REUTERS