Thai government joining central bank view damps rate-cut outlook

[BANGKOK] Thailand's government joined the central bank in signaling borrowing costs may already be low enough, undermining forecasts for more interest-rate cuts ahead of a decision next week.

There is no need for further rate cuts as additional reductions will hurt savers, Finance Minister Sommai Phasee told reporters in Bangkok on Wednesday.

Central bank Deputy Governor Paiboon Kittisrikangwan said last week monetary policy is "highly accommodative" and additional easing would do little to boost economic growth.

Prime Minister Prayuth Chan-Ocha, who seized power in a military coup a year ago, is accelerating spending to bolster an economy reeling from declining exports and industrial production. Five of 24 economists surveyed by Bloomberg in May forecast another rate cut this year, with most of the rest predicting the rate will be held at 1.5 per cent.

"Given the recent comments, it looks like the odds have fallen for a rate cut this month," said Krystal Tan, a Singapore-based economist at Capital Economics Ltd, who predicted a cut this quarter in the Bloomberg survey.

"If the economy would continue to struggle and show no clear signs of a recovery, then there might be renewed concerns about growth which means the pressure for another cut would build again."

BLOOMBERG