Thai finance minister expects agreement on inflation target with central bank this month
The government seeks an interest rate cut as the baht rises to a 31-month high
THAILAND’S finance minister on Tuesday (Oct 1) said an agreement on an inflation target should be reached with the Bank of Thailand (BOT) this month, as the government seeks an interest rate cut and the baht rises to a 31-month high.
Pichai Chunhavajira’s comments comes ahead of meeting, plans for which were first reported by Reuters, between the ministry and central bank this week to discuss the inflation target and strong currency, amid government pressure on the BOT to cut rates and align with fiscal policy aimed at stimulating a sluggish economy.
The baht has risen 5.2 per cent since the beginning of the year, making it the region’s second-best performing currency after Malaysia’s Ringgit.
The baht’s rapid appreciation has been hitting exports and tourism spending, two key drivers of South-east Asia’s second-largest economy.
The baht, inflation target and interest rates are all connected, Pichai said.
“We have spoken and are always in discussion ... these issues require preparing a lot of information,” Pichai told reporters.
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“It’s not a one-time thing,” he said, adding the BOT said that it had managed the baht.
A review of the 1 per cent to 3 per cent inflation target range, which has been in place since 2020, could raise the chance of a rate cut.
The central bank has so far resisted calls for easing and held the benchmark rate at 2.50 per cent for a fifth straight meeting in August. Its chief has said a cut was not necessary, despite easing by the US Federal Reserve. The next rate review is on Oct 16.
Thailand’s inflation target is reviewed every year and must be agreed by the BOT and finance ministry, and approved by the Cabinet before the end of the year.
The Thai economy grew at a faster pace of 2.3 per cent in the April-June quarter on the year, but analysts said fiscal policy uncertainty has clouded the outlook.
The central bank has forecast economic growth of 2.6 per cent this year, after last year’s 1.9 per cent expansion. REUTERS
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