Bank of Thailand Signals No Further Interest Rate Cuts Despite Government Pressure

National —

On October 23rd, 2024, Bank of Thailand (BoT) governor Sethaput Suthiwartnarueput signaled that the central bank is unlikely to reduce interest rates further in the near future, despite growing pressure from the Thai government.

This comes after last week’s rate cut of 0.25%, the first in over four years, aimed at addressing slowing credit growth.

During the IMF and World Bank Annual Meetings in Washington DC on October 22nd, Sethaput emphasized that any additional cuts would require a “high threshold” as the central bank evaluates inflation trends, economic growth, and financial stability. He reiterated that the current inflation target supports the economy and helps keep inflation expectations stable.

Previously, the president of the Thai Restaurant Association commented that while the Bank of Thailand’s recent 0.25% interest rate cut benefits larger restaurant businesses, small and medium-sized establishments, which mostly operate on cash, require more customers rather than lower interest rates.

Prime Minister Paetongtarn Shinawatra’s government has been advocating for additional rate cuts and a higher inflation target to boost economic activity, which has been sluggish.
However, Sethaput warned that raising the inflation target could drive up living costs and bond yields, stressing that the central bank’s measured approach was the right one in contrast to neighboring countries facing higher interest rate hikes.

Sethaput is set to meet with Finance Minister Pichai Chunhavachira later this month to discuss inflation targets for next year, emphasizing that the BoT will continue to prioritize long-term stability.