A top Thai monetary policymaker said the central bank is willing to lower borrowing costs if it is convinced that the weakness in the economy is persistent and not transitory.

South-east Asia’s second-largest economy is currently witnessing softness due to a mixture of cyclical factors as well as structural ones, Bank of Thailand’s assistant governor Piti Disyatat said. The rate panel is trying to disentangle the two effects, he added.

A rate cut is “conditional on how the economy progresses going forward and how we disentangle the softness that we see – if it’s a temporary thing or something more persistent,” he said in an interview to Bloomberg Television on Friday (Feb 9). “That’s the key determinant of the policy decisions going forward.”

The BOT this week kept its benchmark interest-rate unchanged for a second straight time, resisting pressure from Prime Minister Srettha Thavisin to lower borrowing costs to boost consumption and economic growth. But a split 5-2 vote by the rate-setting panel signalled the readiness of some policymakers to start easing.

“Any views are extremely welcome,” Piti said, when asked about the premier’s call for easing. “I personally view it as a healthy debate,” he added.

He also clarified that the central bank is “not wedded to any particular stance” and is willing to adjust policy if the outlook changes.

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Thailand is currently witnessing a disinflation process, with consumer prices in negative territory for four months since October. Economic growth has slowed, while exports have struggled to recover.

“Incoming data indicate there was a soft patch,” Piti said, adding that most of the softness came from external sectors – exports and tourism. A delay in budget due to the late formation of government also contributed to the slowdown,  he said. 

The economic risks are tilted to the downside, Piti said, adding that such an outturn will require some recalibration of the neutral stance. Any cut to rates in that event should not be seen as the start of a stimulus cycle, Piti said.

That said, Piti clarified that he “wouldn’t prejudge the policy decision going forward,” as the committee reviews incoming data before setting policy.

“The aim of the committee is to keep rates abroad neutral,” the BOT assistant governor said. “We have quite a high level of household debt accumulate over the past years, we want to make sure that the financial stability side of the economy is intact.” BLOOMBERG