Thai PM tells central bank chief ‘people are suffering’ from high rates
THAI Prime Minister Srettha Thavisin said he raised concerns over high interest rates and economic conditions in a meeting with the central bank governor on Wednesday (Jan 10), amid growing disagreements over key policies in South-east Asia’s second-largest economy.
“I explained how people and businesses are suffering from high rates… and the governor explained how the central bank was solving the debt problem,” Srettha told reporters after the meeting.
Srettha has been outspoken about his differences with the Bank of Thailand (BOT) over the policy rate, which is at a decade high of 2.50 per cent.
The prime minister is seeking to breathe life into a sluggish economy, with a 500 billion baht (S$19.03 billion) plan to transfer 10,000 baht to 50 million people to spend within six months.
The central bank is independent, and the prime minister has no authority to interfere, Srettha told reporters, adding that they did not discuss the controversial “digital wallet” handout programme. The prime minister had been expected to press for a rate cut and defended the scheme.
Srettha, who is also finance minister, said earlier this week that interest rate hikes were hurting the economy, while his deputy said the increases were “a bit too fast, too aggressive”.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
In a rare move just minutes before Wednesday’s meeting between Srettha and BOT chief Sethaput Suthiwartnarueput, the central bank announced a Jan 15 “policy briefing” to disclose its views.
The meeting marks the second time Srettha has publicly discussed raising his objections directly with the BOT over its monetary policy stance, the last time after a surprise rate hike in September.
The BOT has raised rates by 200 basis points since August 2022 to curb inflation, but held the rate steady at its November meeting. Its next policy review is on Feb 7.
Similarly, Sethaput has voiced concern about the potential impact of the digital wallet handout scheme on inflation and has said the economy needed structural change, not fiscal stimulus.
A group of more than 80 economists and bankers, including two former central bank governors, in an open letter last year warned the plan could breach fiscal discipline. The government intends to finance it through borrowing.
Srettha this week said the central bank might need to consider reducing rates as inflation was very low.
Thailand’s headline inflation came in at minus 0.83 per cent in December, the eighth straight month it was below the BOT’s 1 to 3 per cent target range.
The central bank will clarify the negative inflation situation, Srettha said, adding he had asked the governor to closely monitor bonds that were below investment grade.
The BOT said last month that headline inflation would have been positive had it not been for government subsidies.
Respondents to a bond market survey released on Wednesday expected the BOT to cut rates by up to 50 basis points in the second half of this year, while another business group expected a cut in the second quarter.
Share with us your feedback on BT's products and services
