Thailand to begin ’25 inflation target talks soon

Thailand’s central bank governor and finance minister are set to meet in early September to begin negotiations on an inflation target for 2025, according to a senior official.

The government is seeking to establish a new target with an eye towards a potential interest rate cut, which it has been advocating for months.

The government and the Bank of Thailand (BOT) have been at odds over monetary policy for some time. The government has repeatedly urged the BOT to cut interest rates to boost economic growth, while the central bank has maintained its stance, citing concerns about inflation.

The review of the inflation target range, currently set between one per cent and three per cent, could increase the likelihood of a rate cut, according to former Prime Minister Srettha Thavisin.

The BOT will propose a new target approved by its monetary policy committee (MPC) at the upcoming meeting.

Despite the government’s calls for easing, the BOT has kept its benchmark interest rate unchanged at 2.50 per cent. The next rate review is scheduled for October 16.

The finance ministry is preparing data for the meeting, which will take place after Prime Minister Paetongtarn Shinawatra confirms her cabinet.

Both the BOT and the finance ministry must agree on the new inflation target, which will then be approved by the cabinet.

The BOT has maintained that the current target range is functioning well, even though headline inflation has averaged just 0.11 per cent from January to July. The central bank has not met the target since it was set in 2020.

Thailand’s economic growth has shown signs of improvement, but uncertainty surrounding fiscal policy remains a concern. The BOT has predicted 2.6 per cent growth for 2024, following last year’s 1.9 per cent.

Attribution: Reuters

Subediting: M. S. Salama