Thai central bank governor has insisted that political pressure won’t force his hand to make its interest rate independently, according to CNBC.
The proof is in the pudding,” Sethaput Suthiwartnarueput told CNBC’s Street Signs Asia.
Despite the “clamoring” for rate cuts, the BOT didn’t act on it “if we weren’t operating independently,” added.
“I think that the governance framework for that is quite clear … the decisions that have been made indicate that they are taken on the basis of [what] we feel is the most appropriate for the economy, rather than considerations about trying to ease political or other pressures.”
The BOT kept the key interest rate steady at 2.50% in its latest policy meeting in April.
But Srettha government has put pressure on the central bank to lower rates.
Lower borrowing costs tend to stimulate economic growth as it encourages businesses to invest and consumers to spend.
In the minutes for the April meeting, the monetary policy committee “expressed concern over elevated household debt and recognized the importance of debt deleveraging.”
“The high level of debt outstanding could hinder long term economic growth, especially if debt does not contribute to future income or wealth accumulation,” it said.
Sethaput acknowledged that it has been a “tough balancing act” for the central bank as it tries to manage weak economic recovery and monetary policy.
“If you look at the reasons that have caused the growth to be sluggish, it doesn’t have so much to do with things that are sensitive to interest rates,” he said.
The BOT chief said the current rate was “supportive of the recovery,” and is consistent with trying to get “an orderly deleveraging — getting that balancing act between not raising the debt burdens for households too much, but at the same time, not encouraging people to take on too much new debt.”
While inflation pressures were subdued in the recent months, “we see inflation again, gradually picking up and entering back into our target range — which is 1% to 3%,” by the end of the year, Sethaput told CNBC.
Structural headwinds make the outlook for the economy uncertain, the governor added, with the need to raise productivity as the country faces demographic challenges with a “shrinking labor force.”
There needs to be a “bigger focus on public investment, rather than on short-term stimulus type measures,” he said.
“I think, very importantly, a bigger emphasis upon deregulation,” including the “ease of doing business type considerations,” Sethaput noted.
