Thailand’s Finance Ministry calls for rate cut

Thailand’s Finance Ministry is urging the Bank of Thailand to lower interest rates to stimulate the economy and reduce the strength of the baht. This comes after a former governor cautioned against government interference in the central bank.

Deputy Finance Minister Paopoom Rojanasakul stated that a rate cut is likely in the near future, with a 25-basis point reduction being a possible initial step. The decision will be closely monitored and adjusted as needed.

Paopoom also indicated that the baht’s current exchange rate of around 33.39 to the US dollar is overvalued, suggesting that a more appropriate level would be 34.5.

Prime Minister Paetongtarn Shinawatra is following her predecessor’s lead in tightening control over the Bank of Thailand. The bank has resisted calls to lower the key interest rate of 2.5 per cent, the highest since 2013.

While Paetongtarn hasn’t directly advocated for a rate cut, ministers like Paopoom have urged for lower borrowing costs due to low inflation and a sluggish economy.

The government is advocating for a change in the central bank’s stance, including raising the inflation target from 1 to 3.5 per cent. There are efforts to appoint Kittiratt Na-Ranong, a critic of the bank’s current policy, as the new BOT chairman, which may increase pressure on the governor.

Attribution: Bloomberg

Subediting: M. S. Salama