11 July 2024

The Bank of Thailand has defended the recent decision by the Monetary Policy Committee to maintain the policy rate at 2.50%, claiming that the decision was based on the principle that the policy rate must not pose an obstacle to economic growth, not affect financial stability or inflationary framework in the Thai economic context.

The statement was made by Piti Disyatat, assistant governor of the monetary policy group today, in response to Prime Minister Srettha Thavisin’s comment last week that the policy rate is too high and does not correspond with the declining inflation rate.

The central bank’s monetary policy committee decided to increase the policy rate by 25 basis points last September. The rate was reconfirmed in last November and the central bank to due to consider the policy rate again in February.

Piti said that the committee adjusted the policy rate step-by-step and not in one go, in line with the central banks of advanced economies adding, however, that Thailand cannot resist the global interest rate trend for long.

Citing the case when China decided to reopen the country after the COVID-19 pandemic, Piti said the central bank shared the same expectation with the government, that China’s move would help boost the recovery of Thai economy and decided to tailor its monetary policy in line with the change.

Using a football analogy, the assistant governor said a player who controls the ball must pass the ball to his teammate who is running, not to the player who is standing still.

“The monetary policy committee is like the goalkeeper, while the Finance Ministry and the government are the midfielders supporting the forwards. If the goalkeeper leaves the goal mouth to try to score a goal, it will leave the goal at risk,” said Piti.

He said the central bank is open to divergent views from all stakeholders, particularly the Finance Ministry and the government, when reviewing its decision on the policy rate.

Meanwhile, Suwannee Jetsada, assistant governor of the Supervision Group, said that the central bank has always been concerned about the so-called “fragile” group and has asked commercial banks to exercise caution when increasing lending rates for the small borrowers.

As for the interest rate spread, which has been the subject of public criticism due to the wide gap between the lending and deposit rates, she said that the matter will have to be discussed with commercial banks.