Sethaput makes a strong case for the independence of central banks

Speaking at a seminar on Friday, he argued that this independence is crucial for maintaining long-term economic stability and credibility.

He stressed that these institutions must possess the autonomy to make decisions without external pressure, even when such choices may diverge from prevailing short-term economic trends. This independent decision-making is essential for ensuring that monetary policy remains effective and aligned with broader economic goals. 

Furthermore, the governor highlighted the necessity for central banks to focus on long-term stability, placing it above immediate economic gains. This perspective is vital for fostering a resilient economic environment capable of weathering fluctuations and uncertainties. 

Citing research from the International Monetary Fund conducted in 2023,  Sethaput pointed out that nations with independent and trustworthy central banks are more successful in sticking to inflation forecasts, thereby achieving consistently low inflation rates — a key indicator of economic health.

Additionally, Sethaput acknowledged the complexity of monetary policy decisions, which often require careful consideration of both costs and benefits. The balancing act between short-term and long-term objectives is a challenge that central banks must navigate to effectively guide the economy. 

He addressed the importance of responsible lending practices, advocating higher standards among financial institutions. He noted that implementing these measures is crucial for promoting financial discipline amongst Thai citizens, ultimately contributing to the overall stability and health of the country’s economic landscape.
 

Challenges and future outlook

The governor pointed out that short-term thinking, often driven by economic, social, and political factors, could lead to accumulating problems that become more costly to solve over time.

He called for cooperation among all sectors — government, private sector, and civil society — to address these challenges.

"Awareness of the problem is key to solving it. No single person or agency can solve these issues alone," Sethaput stated. 

The BOT governor concluded by urging policymakers and citizens alike to consider the long-term effects of economic decisions on the country, suggesting that this approach is crucial for Thailand's sustainable economic development.

His speech comes at a time when central banks worldwide are navigating complex economic landscapes, balancing the need for economic growth with the imperative of maintaining financial stability. 

The BOT’s stance on independence aligns with global trends in central banking practices, emphasising the importance of insulating monetary policy from short-term political pressures.