Time is not right for policy rate reduction, BOT governor says
BOT governor explains why cutting the interest rate is not the final solution for the Thai economy
Reducing the policy rate will not help solve the current economic problems being faced by Thailand, the Bank of Thailand (BOT) governor Sethaput Suthiwartnarueput said, adding that the current rate of 2.5% set by the BOT’s Monetary Policy Committee (MPC) was suited to the present situation.
The governor was speaking at a meet-the-press event on Thursday at the Bank of Thailand Learning Centre in Bangkok, the first time in several months he has given an interview to the press.
One of the most asked questions is why the BOT still has not reduced the policy rate, despite the government and the finance ministry urging it to do so on several occasions, saying that such a move would help stimulate the economy.
At the last MPC meeting in June, the committee voted 6 to 1 to maintain the policy rate of 2.5% amid concerns from both government and private sectors.
“The current rate of 2.5% is already suitable and in line with our estimates on the situation ahead,” said Sethaput. “However, if key factors change in the future, the BOT is ready to adapt to the situation and would promptly revise the policy rate.”
Sethaput added that considering the policy rate requires detailed deliberation of all aspects as well as the impacts on all sectors. The MPC needs to closely monitor the economic situation both domestically and overseas, as its decision will affect the Thai economy in the long term and not just in the immediate future, he said.
The BOT governor insisted that reducing the policy rate is not the only solution to economic problems, as the central bank can use other measures to improve the economy. These include, for example, household debt restructuring, providing soft loans, loan guarantee schemes, debt clinics, and using Responsible Lending (RL) measures among financial institutions.
“Many countries have been adopting the practice of using multiple measures to fix economic problems. They also consider other indicators besides the inflation rate for a suitable time to adjust the interest rate,” he said.
Sethaput said the BOT is especially concerned about household debt because lowering the interest rate could result in more people applying for loans, which will affect overall financial stability.
“This is why we need to keep the policy rate at a suitable level so that it does not impact household debts or increase risks in the economic system,” he said.
